ifi 


THE    CURRENCY    PROBLEM 
IN   CHINA 


WEN  PIN  WEI,  A.  B.,  M.  A. 


SUBMITTED  IN  PARTIAL  FULFILMENT  OF  THE  REQUIREMENTS 

FOR  THE  DEGREE  OF  DOCTOR  OF  PHILOSOPHY 

IN  THE 

Faculty  of  Political  Science 
Columbia  University 


NEW  YORK 

1914 


Digitized  by  the  Internet  Archive 
in  2007 


http://archive.org/details/currencyproblemiOOweiwrich 


THE    CURRENCY    PROBLEM 
IN  CHINA 


BY 

WEN  PIN  WEI,  A.  B.,  M.  A. 


SUBMITTED  IN  PARTIAL  FULFILMENT  OF  THE  REQUIREMENTS 
FOR  THE  DEGREE  OF  DOCTOR  OF  PHILOSOPHY 

IN  THE 

Faculty  of  Political  Science 
Columbia  University 


NEW  YORK 
I9H 


\\G> 


Copyright,  1914 

BY 

The  Faculty  of  Political  Science  of 
Columbia  University,  New  York 


PREFACE 

My  aim  in  this  study  has  been  not  to  advocate  any  particu- 
lar plan  of  reform,  but  rather  to  present  the  different  phases 
of  the  outstanding  currency  problem  in  China  and  to  trace 
the  various  attempts  at  reform  that  have  been  made  since 
the  modern  movement  for  reform  in  China  began.  My  in- 
terest in  this  subject  was  first  aroused  while  an  under- 
graduate in  Amherst  College  studying  theories  of  money 
and  banking  under  Professor  John  M.  Clark.  My  atten- 
tion was  then  called  to  the  unsatisfactory  currency  condi- 
tions in  China  and  this  essay  may  be  said  to  have  begun 
then  and  there.  While  by  no  means  an  exhaustive  treat- 
ment of  the  subject  it  may,  as  I  hope,  serve  to  familiarize 
the  reader  with  the  nature  of  the  currency  problem  in  its 
important  bearings  and  likewise  with  the  currency  history 
of  China,  concerning  which  there  is  yet  no  work  covering 
the  whole  subject. 

Several  of  my  instructors  in  the  Dq>artment  of  Economics 
in  Columbia  University  and  other  friends  have  aided  me  in 
the  preparation  of  this  work.  I  take  pleasure  in  acknowl- 
edging my  indebtedness  particularly  to  Professors  Edwin 
R.  A.  Seligman  and  Henry  R.  Seager  for  their  guidance 
and  help  to  me  .in  many  ways;  to  Professor  Eugene  E. 
Agger,  who  read  the  manuscript  through  and  offered  many 
helpful  suggestions;  and  to  my  friend  Professor  Jeremiah 
W.  Jenks  of  New  York  University,  who<  with  great  pains 
made  clear  to  me  at  different  times  many  difficult  points  in 
connection  with  the  problem  of  currency  reform  in  China. 
But  my  greatest  obligation  is  to  Professor  Wesley  C. 
265]  5 


305655 


6  PREFACE  [266 

Mitchell  for  the  painstaking  care  with  which  he  has  helped 
me  to  make  this  monograph  readable  and  to  get  it  through 
the  press.  His  many  suggestions,  as  to  both  matter  and 
form,  have  without  exception  been  incorporated. 

W.  P.  Wei. 
Columbia  University,  New  York  City,  April  10,  1914. 


TABLE  OF  CONTENTS 


PART  I. 


HISTORICAL  SURVEY. 


CHAPTER  I. 

Ancient  Money. 

Ma  Tuan  Lin  on  the  money  preceding  the  Chow  dynasty;  The  round 
money;  The  chan,  pu  and  tao  moneys  under  the  Chow  dynasty; 
Currency  conditions  under  the  Ch'in  and  Han  dynasties;  Wang 
Mang's  innovations;  Attempts  to  abandon  the  use  of  metallic 
money;  Currency  conditions  under  the  Tang  dynasty    .        .         .11 


CHAPTER  II. 

Government  Paper  Money. 

The  "flying  money;"  The  "convenient  money;"  The  iron  money 
in  the  province  of  Shu  and  invention  of  the  chiao-tze  notes;  Over- 
issue and  depreciation  of  the  chiao-tze  notes;  The  hui-tze,  kuan- 
tze  and  Chuan  yin  notes  of  the  Southern  Sung  dynasty;  The  pao- 
ch'ao  of  the  Chin  Tartars;  Paper  currency  issues  under  the  Mongol 
(Yuan)  dynasty,  the  Yuan  pao-ch'ao;  Marco  Polo  on  the  Yuan 
paper  money;  Ming  Tai-tzu's  efforts  to  re-establish  the  paper 
currency;  Paper  currency  policy  of  the  Manchu  (Ch'ing)  dynasty.  19 
267]  7 


CONTENTS  [268 

PAGE 

PART  II. 
THE  PROBLEM  OF  CURRENCY  REFORM. 


CHAPTER  III. 

Currency  Conditions  in  Modern  China. 

Peculiar  double-standard  nature  of  the  present-day  circulation;  1. 
The  copper  cash  currency;  Peking  cash  currency ;  The  tiao;  2. 
The  silver  tael  currency;  Variations  of  the  tael  unit;  The  K'up'ing, 
Haikuan  and  Shanghai  taels;  3.  Foreign  dollars  in  China;  Imita- 
tion dollars  and  chopped  dollars;  4.  Beginning  of  the  provincial 
coinage  and  circumstances  leading  to  the  establishment  of  the 
Canton  mint;  Circumstances  leading  to  the  overissue  and  depreci- 
ation of  the  minor  silver  coins;  Other  provincial  mints  established 
or  projected;  The  note  circulation;  Necessity  of  monetary  reform. 

CHAPTER  IV. 
Currency  Reform,  1895-1905. 

Reform  agitation  after  the  Japanese  War,  1894-95;  Edict  of  August 
26,  1901;  Edict  of  February  2,  1902;  Currency-reform  pledges  in 
the  new  commercial  treaties;  Fall  of  the  silver  exchange:  Loans 
and  indemnities  of  the  Government;  Financial  resources  of  the 
Government;  Characteristics  of  the  different  taxes;  Inelasticity  of 
the  revenue;  Effects  of  the  fall  of  the  silver  exchange  on  the  gov- 
ernment finances;  The  new  Silver  Question  and  simultaneous  re- 
forms in  different  countries;  Invitation  by  Mexico  and  China  to 
the  Government  of  the  United  States  for  an  international  inquiry; 
Arguments  in  the  Chinese  memorandum;  Appointment  of  the 
American  Commission  on  International  Exchange;  Edict  of  April 
22.  1903,  creating  the  Financial  Commission;  Hu  Wei-te's  me- 
morial for  the  introduction  of  the  gold  standard;  His  plan  criti- 
cised; Commissioner  Jeremiah  W.  Jenks  in  China;  His  Memo- 
randa on  a  New  Monetary  System  for  China  and  Considerations 
on  a  Monetary  System  for  China;  The  American  plan  analyzed; 
The  Seventeen  Suggestions;  Special  advantages  of  adopting  the 
proposed  plan;  Historical  development  of  the  gold-exchange 
standard  system  in  the  Dutch  East  Indies  and  in  British  India; 
Its  introduction  into  the  Philippines;  The  question  before  the 
Chinese  Government;  Difficulties  in  connection  with  the  choice 
of  the  coinage  ratio  and  the  principles  involved;   Chang  Chih- 


269] 


CONTENTS 


tung's  opposition  to  the  proposed  plan;  His  arguments  criticised; 
His  proposal  of  a  silver  standard;  Tael  coinage  experiment  at 
Wuchang;  Currency  conditions  in  the  country;  Overissue  aud 
depreciation  of  the  new  copper  yuan;  Memorial  and  Regulations 
of  August  22,  T905;  The  Act  of  November  19,  IQ05       .         .         .52 

CHAPTER  V. 
Currency  Reform,  from  iqo6  to  the  Revolution  of  191 1. 

Reconsideration  of  the  Act  of  November,  1905;  Defects  of  the  Act; 
The  copper  currency  conditions;  Coinage  made  a  means  of  rais- 
ing money;  The  rise  of  the  silver  exchange  and  the  actions  of  the 
Philippine  Government,  Siam  and  Mexico;  The  lessons  taught  by 
these  experiences;  The  Board  of  Finance's  policy;  Edict  of  Oc- 
tober 5,  1908;  The  Reform  Act  promulgated,  May  24,  1910;  Treat- 
ment of  the  old  coins  provided;  Reform  of  the  Bank  of  Issue; 
The  currency  loan;  Execution  of  the  reform  postponed  on  account 
of  the  Revolution 1 19 

APPENDICES. 

(1)  The  Revolutionary  paper  money,  its  amount  and  depreciation; 
Dr.  G.  Vissering's  gold-standard  plan;  The  New  Silver-Standard 
Act;  Creation  of  the  Currency  Department 133 

(2)  The  Act  of  November  19,  1905 142 

(3)  The  Reform  Act  of  May  24,  1910 148 

(4)  Table  showing  the  gold  price  of  silver  since  1871       .         .         .  155. 


CHAPTER  I 

Ancient  Money 

The  classical  authority,  Ma  Tuan  Lin,1  in  his  Resume 
of  Ancient  Currencies  asserts  that  money  was  in  circulation 
in  China  as  early  as  the  reign  of  T'ai-hao  (2953-2839  B.  C.) 
and  says  further  that  the  money  of  the  dynasties  of  Hsia 
(1990-1558  B.  C.)  and  Shang  (1 558-1050  B.  C.)  was  tri- 
metallic,  namely  gold,  silver  and  copper  and  that  there  were 
the  ch'ien,  or  the  round  money,  the  pn,  or  the  bell-shaped 
money,  the  tao,  or  the  knife-shaped  money,  and  the  cowry- 
shells.  Kuan-tze 2  credits  Yu,  who  was  founder  of  the 
Hsia  dynasty,  with  having  made  money  from  metal  obtained 

1  Ma  Tuan  Lin  was  born  in  Poyang,  in  the  province  of  Kiangsi, 
about  1245  A.  D.  His  Wen  Hsien  T'ung  K'ao,  or  Encyclopaedic  Re- 
searches, published  in  1321,  is  a  very  extensive  historical  research  work 
and  has,  since  its  appearance,  been  regarded  as  the  standard  book.  An 
historical  study  of  metallic  and  paper  money  constitutes  vols,  viii  and 
ix  of  this  work.  Of  the  paper  money  he  was  particularly  qualified  to 
treat,  as  he  was  an  eye-wkness  of  its  abuses.  There  is  an  authorized 
continuation  of  the  Wen  Hsien  Tung  K'ao,  in  which  the  currency  his- 
tory is  brought  down  to  modern  times. 

The  excellent  work  On  Chinese  Currency  by  Dr.  W.  Vissering  (elder 
brother  of  Dr.  G.  Vissering,  monetary  adviser  to  the  Chinese  Govern- 
ment), published  in  English  in  1877  at  Leiden  (both  the  Congressional 
Library  and  the  library  of  Columbia  University  possess  a  copy),  is  a 
digest  of  Ma  Tuan  Lin  and  covers  the  history  down  to  the  beginning 
of  the  Yuan  dynasty.  The  original  text  in  Chinese  of  the  more  im- 
portant passages  appears  also  in  Dr.  Vissering's  work.  My  citations  are 
from  the  original  Chinese  version. 

2  Kuan-tze,  the  celebrated  statesman  in  the  seventh  century  B.  C,  in 
the  dukedom  of  Ch'i  (the  province  of  Shantung). 

271]  11 


12  THE  CURRENCY  PROBLEM  IN  CHINA  [2J2 

from  mines  on  Mount  Li  and  with  distributing  it  as  alms. 
He  also  credits  Tang,  founder  of  the  Shang  dynasty,  with 
having  extracted  metal  from  the  ores  of  Mount  Chuang 
which  he  cast  into  shu-kin,  or  redemption-money,  with  which 
to  redeem  children  with  whom  the  poor  had  been  compelled 
to  part  on  account  of  the  famine  and  drought.  Only  these 
few  particulars  were  handed  down,  and  there  is  no  positive 
evidence  to  substantiate  these  assertions  concerning  the 
ancient  currency  prior  to  the  Chow  dynasty.  It  is  gener- 
ally believed  that  during  these  early  stages  of  Chinese  his- 
tory the  medium  of  exchange  consisted  chiefly  of  cowry- 
shells,  tin-wrought  metals  including  gold,  and  probably  any 
metallic  tool  of  convenient  size,  and  that  the  ch'ien,  the  pu, 
and  the  tao  did  not  come  into  use  until  a  much  later  period. 

Chiang  T'ai-kung,  the  celebrated  statesman  at  the  time 
of  the  establishment  of  the  Chow  dynasty,  first  laid  down 
monetaiy  rules  for  the  coinage  of  the  round  money  (the 
cash  or  ch'ien)  about  the  year  1032  B.  C.  Ma  Tuan  Lin 
says,  "  the  gold  money  unit  of  the  Chow  dynasty  was  the 
chin  (or  catty)  a  cubic  inch  in  size  and  the  copper  money 
was  round  with  a  square  hole  in  the  center."  It  is  also 
said  that  the  idea  of  the  hole  was  suggested  by  the  practice 
of  stringing  the  cowry  shells. 

The  round  money  did  not  gain  as  extensive  circulation 
as  the  others  just  spoken  of,  partly  because  of  the  weakness 
of  the  central  authority  and  partly  for  psychological  reasons. 
The  ch'an,  the  pu,  and  the  tao,  which  we  shall  presently  de- 
scribe, resembled  the  implements  then  in  daily  use;  hence, 
they  were  more  easily  popularized.  The  round  money, 
on  the  contrary,  had  no  obvious  value  in  use. 

The  ch'an,  or  spade-shaped  money,  the  pu,  or  bell-shaped 
money,  and  the  tao,  or  knife-shaped  money,  flourished  dur- 
ing the  feudal  era  from  the  seventh  till  the  third  century 
B.  C.   in  practically  the  whole  of  what  was  then  China. 


27Z\ 


ANCIENT  MONEY 


13 


Kuan-tze  in  the  dukedom  of  Ch'i,  of  which  he  was  the  prime 
minister  in  the  seventh  century  B.  C,  gave  them  regular 
shapes  and  fixed  weights  which  must  have  been  an  important 
step  toward  popularizing  their  use.  These  moneys  together 
with  the  cowry-shells  formed  the  ordinary  currency,  or  the 
"  lower  grade  (p'in)  money  " ;  gold,  pearls,  and  precious 
stones  forming  the  upper  two  grades  (p'in)  of  the  cir- 
culation. 


A    FORM    OF   THE  CH'aN-MONEY 
OBVERSE 


TWO  DIFFERENT   FORMS   OF   THE   PU-MONEY 
OBVERSE  OBVERSE 


The  knife-money  of  Ch'i  is  undoubtedly  the  best  known 
of  these  ancient  moneys,  though  none  of  them  are  today 
rare.     These  moneys  usually  bear  legends  indicating  their 


1 4       THE  CURRENCY  PROBLEM  IN  CHINA  [2^ 

places  of  issue  (usually  the  names  of  cities)  their  material, 
and  their  "  weight-value  ".x 

THE    CH'l    TAO 


ROUND   MONEY   OF  EASTERN    CHOW    PRINCIPALITY 
(PROBABLY  ABOUT   3OO  B.    C.) 


The  prince  of  Ch'in,  known  by  his  later  title,  Shih 
Huangti,  unified  the  country  by  gradually  subduing  all  the 
rival  principalities  (221  B.  C.)  His  name  has  always  been 
associated  with  the  building  of  the  Great  Wall.  He  ex- 
tended the  circulation  of  the  round  money  by  prohibiting 
the  use  of  cowry-shells,  pearls,  gems,  and  precious  stones 
as  currency.  Gold  in  units  of  yi,  20  taels  in  weight,  was 
decreed  the  higher  grade  (p'in)  money,  and  the  round 
money,  half-tael  in  weight,  or  pan-liang,  the  lower  grade 
(p'in),  or  common  currency.  It  seems  that  gold  in  such 
measures  of  weight,  the  yi  and  chin,  the  former  20  taels 

1  Catalogue  of  Chinese  Coins,  pp.  4-17,  on  spade-money;  pp.  30-212, 
on  the  pu-money;  pp.  213-298,  on  the  knife-money. 

The  Mint  of  the  United  States  at  Philadelphia  has  among  its  col- 
lection of  Chinese  coins  samples  of  the  various  kinds  of  money  men- 
tioned. A  few  are  also  on  exhibition  in  the  Metropolitan  Museum 
of  Natural  History,  New  York  City.  The  ts'i-tao  and  new  pu,  here- 
after described,  are  also  found  among  the  mint  collection.  So  are 
the  Ch'in  half-taels. 

The  weight-value  of  these  moneys  is  indicated  on  their  face.  For 
instance,  the  inscriptions  on  the  round  money,  page  15,  indicate  that  it 
is  "half-tael,"  and  the  knife  ts'i-tao,  page  16,  500  (units). 


275]  ANCIENT  MONEY  !5 

and  the  latter  16  taels,  was  used  as  currency  in  the  early 
history  quite  extensively. 

THE  CH'lN    HALF-TAEL  ROUND    MONEY 
OBVERSE 


The  Han  dynasty  changed  the  gold  unit  of  weight  from 
the  yi  of  20  taels  to  the  Chow  catty  of  16  taels.  The  copper 
cash,  5  chu  in  weight,  (about  %  of  the  tael)  was  made  the 
standard ;  but  frequent  alterations  were  made  in  the  weight 
of  this  unit.  The  irregular  value  of  the  coins  in  circula- 
tion, caused  partly  by  debasement  and  partly  by  the  presence 
of  counterfeits,  led  to  occasional  price  disturbances  till  the 
reign  o>f  Wenti,  who,  unwilling  to  enforce  the  penalty 
against  counterfeiting  and  seeking  at  the  same  time  to  give 
the  people  a  convenient  currency,  decreed  free  private  coin- 
age in  175  B.  C.  It  is  recorded  that  on  account  of  this 
decree  the  Prince  of  Wu,  by  working  the  mines  of  Mount 
Ch'i  obtained  large  quantities  of  copper  for  minting,  and 
that  his  money  had  an  extensive  circulation,  whereby  he 
amassed  great  wealth.  Teng  Tung,  a  favorite  courtier, 
was  given  the  mines  of  the  Copper  Mountains  in  the  Yentao 
District,  and  his  coins  circulated  throughout  the  empire. 
In  the  next  reign  private  coinage  was  again  prohibited. 

Wang  Mang,  while  regent,  introduced  three  new  varie- 
ties of  money  in  addition  to  the  5  chu  coin  of  Han,  namely, 
(1)  the  "  large  coin"  which  was  2  inches  in  diameter,  12 
chu  in  weight,  bearing  inscriptions  meaning  "  large  cash, 
worth  50";  (2)  the  ts'i  tao,  worth  500  units  the  nature  of 


i6 


THE  CURRENCY  PROBLEM  IN  CHINA 


[276 


which  is  not  stated;  (3)  the  tsuo  tao,  worth  50  units. 
When  he  usurped  the  throne  (j-22  A.  D.)  the  tao's  and 
the  5  chit  coins  were  suppressed  and  no  fewer  than  28  differ- 
ent kinds  of  money  were  decreed  as  the  medium  of  ex- 
change. These  28  kinds  of  money  consisted  of  gold,  silver 
of  two  qualities,  4  grades  of  tortoise  shells,  5  grades  of 
cowry-shells,  10  grades  of  the  pu,  or  bell-shaped  money, 
and  6  grades  of  copper  coinage.  The  shells  varied  in 
quality,  while  the  pu  and  the  coins  varied  in  size.  Just 
what  made  him  do  this  it  is  difficult  to  tell.  The  new  issues 
were  probably  a  revival  of  all  the  different  varieties  of 
money  that  had  existed  under  the  Chow  dynasty,  the  pre- 
cedents of  which  Wang  Mang  was  anxious  to  imitate  in 
every  possible  way  for  political  reasons. 


WANG    JIANGS   TS  I   TAO 


THE    NEW    PU   OF   WANG    MANG  S   REIGN 


0 


LAJ 

No  further  development  of  importance  took  place  in  the 
currency  until  the  time  of  the  establishment  of  the  Tang 
dynasty.  The  experiences  with  the  coinage  were  not  en- 
couraging during  the  years  between  Han  and  Tang.  Not 
infrequently  efforts  were  made  to  abolish  the  coinage  use 


2yy]  ANCIENT  MONEY  !7 

of  metallic  money  and  to  return  to  the  use  of  commodities 
as  the  medium  of  exchange.  For  instance,  under  Wenti 
of  Wei  in  the  time  of  the  Three  Kingdoms  metallic  money 
was  decreed  abolished  (220  A.  D.),  and  measures  of  grain 
and  rolls  of  silk  were  substituted  as  circulating  media. 
This  state  of  affairs  lasted  40  years  in  Wei  until  ex- 
cessive deterioration  in  these  goods  led  to  the  restoration 
of  the  copper  coinage  and  the  use  of  metallic  money  again. 

After  the  Tang  dynasty  had  established  itself,  an  attempt 
was  made  to  standardize  the  coinage.  The  Tang  coinage 
regulations  were  promulgated  in  the  fourth  year  of  Wute 
(620  A.  D.).  The  coin  was  fixed  at  1/10  of  a  tael  in 
weight  and  8/10  inch  in  diameter,  1000  coins  to  weigh  6 
catties  and  4  taels.  Mints  were  established  in  several  im- 
portant cities  and  were  put  under  the  supervision  of  gov- 
ernment officials.  Counterfeiting  was  made  punishable  by 
confiscation  of  property  and  death.  The  coins  which  bear 
the  inscription  of  K'ai  Yuan  T'ung  Pao  minted  at  this  time 
are  found  to  this  day  among  the  cash  in  circulation.  One 
peculiar  practice,  which  was  not  unfamiliar  in  mediaeval 
Europe,  was  that  the  right  to  coin  money  was  granted  to 
three  of  the  emperor's  favorites,  the  princes  of  Ch'in  and 
Ch'i  and  Fei-chi. 

The  policy  of  the  rulers  all  through  these  ages  appears  to 
have  been  determined  by  the  principle  that  coinage  was  for 
the  convenience  of  trade  and  a  means  of  enriching  the  nation. 
There  is  no  case  on  record  in  which  the  government  tried 
to  make  a  profit  for  itself  from  the  issue  of  copper  money. 
No  effort  was  ever  made  to  coin  the  precious  metals,  though 
both  gold  and  silver  were  long  used  as  commodity  money. 
Copper  on  the  contrary,  was  coined,  not  infrequently  in 
several  denominations.  In  order  to  have  an  accurate  view 
of  the  currency  conditions  of  these  early  days  of  history  it  is 
necessary  to  realize  that  there  was  a  very  limited  use  of  the 


18       THE  CURRENCY  PROBLEM  IN  CHINA  [2;8 

coins.  The  revenues  were  always  collected  in  kind,  in  the 
agricultural  products  of  the  land,  and  in  silk.  The  coun- 
try was  yet  undeveloped  and  bartering  was  still  the  prin- 
cipal method  of  exchange. 

There  was  marked  progress  in  commerce  and  trade  under 
the  rule  of  the  Tang  dynasty,  which  came  into  power  by 
putting  an  end  to  the  long-drawn  civil  strife.  The  stan- 
dardizing of  the  coinage  must  have  greatly  facilitated  com- 
merce. However,  counterfeit  issues  soon  appeared  and  it 
came  to  pass  that  the  chronicles  of  coinage  under  this 
dynasty  were  little  more  than  a  monotonous  repetition  of 
harsh  laws  against  counterfeiting.  Owing  to  the  use  of 
a  metal  which  had  but  slight  value,  it  can  be  easily  imagined 
that  the  art  of  coining  must  have  been  simple  and  inex- 
pensive. This  made  it  possible  for  false  coiners  to  spring 
up  in  large  numbers,  and  coin  money  by  the  same  process 
the  mints  used.  Ma  Tuan  Lin  tells  us  that  when  the  laws 
which  made  counterfeiting  dangerous  were  applied  effec- 
tively on  land,  the  clever  coiners  transferred  their  oper- 
ations to  vessels  and  rafts  in  the  middle  of  the  rivers. 
This  practice  led  to  the  issue  of  an  edict  in  this  dynasty  to 
the  effect  that  when  there  was  found  above  ioo  catties  of 
copper  and  tin  on  board  a  vessel  it  should  be  confiscated. 
The  art  of  coining  was  never  improved  upon.  Dr.  Visser- 
ing  points  out  the  fact  that  experience  elsewhere  proves 
that  the  most  effective  means  of  preventing  false  coining 
is  to  render  the  mechanical  execution  of  the  coin  so  perfect 
as  to  make  forgery  impossible,  and  that  the  best  method  of 
coining  is  not  the  crude  practice  of  casting  the  coins  in 
moulds  but  the  process  of  striking  them.  But  in  China 
coins  continued  to  be  cast  until  the  close  of  the  nineteenth 
century. 

It  was  in  the  Tang  dynasty  that  paper  currency,  to  which 
we  turn  in  the  following  chapter,  was  invented. 


CHAPTER  II 
Government  Paper  Money 

The  first  appearance  of  paper  money  was  at  about  the 
beginning  of  the  ninth  century  (806  A.  D.).  It  was  called, 
fei-ch'ien,  or  "  flying-money." l  The  currency  conditions 
had  become  intolerable  by  this  time.  Not  only  was  the 
coinage  irregular,  but  the  supply  of  coins  was  also  insuffi- 
cient, partly  because  of  slow  mintage,  and  partly  because  of 
the  shortage  in  the  supply  of  the  metals.  Even  copper  and 
bronze  statues  and  images  of  Buddha  were  melted  down  for 
metal.  To  supply  the  deficiency  of  copper  coins,  iron  was 
minted,  and  in  the  province  of  Shu  (Szechuan)  iron  had 
become  practically  the  only  currency.  With  the  develop- 
ment of  trade  these  moneys  of  copper  and  iron  must  have 
been  most  inconvenient  on  account  of  their  weight. 

Ma  Tuan  Lin's  description  of  the  appearance  of  the 
fei-ch'ien  is  obscure,  but  enough  is  given  to  show  its  signi- 
ficance. The  fei-ch'ien  was  a  certificate  of  deposit  issued 
by  government  offices  in  exchange  for  coins.  These  certi- 
ficates were  considered  so  convenient  that  they  soon  became 
part  of  the  circulation.  Ma  Tuan  Lin  says  that  "  because 
the  merchants  could  travel  or  carry  on  trade  relations  in 

1  Ma  Tuan  Lin  tells  that  in  the  reign  of  Wuti  (119  B.  C),  of  the 
Han  dynasty,  "pieces  of  skin  of  white  stags,  measuring  a  square  foot 
and  embroidered  on  the  hems,  of  a  nominal  value  of  400,000"  [units, 
not  specified],  were  used  among  the  feudal  princes  and  nobles  of  the 
court  to  represent  values.  This  curious  medium  of  exchange  was  known 
as  "  skin  currency  ".  But  it  can  hardly  be  called  currency  proper,  as  it 
never  circulated  beyond  the  few  court  nobles. 

279]  19 


20  THE  CURRENCY  PROBLEM  IN  CHINA  [2go 

distant  places  with  light  equipment,  this  new  currency  came 
to  be  called  '  flying-money  \"  Fear  that  it  would  displace 
the  metallic  money  led  to  its  suppression.  Nothing  more 
is  said  about  it. 

Very  similar  was  the  pien-ch'ien,  meaning,  as  the  term 
denotes,  "convenient  money"  (about  960  A.  D.).  Like 
the  fei-ch'ien  it  resembled  a  kind  of  banking  facility  offered 
by  the  Government  to  the  merchants.  It  first  appeared  at 
the  time  when  the  Sung  dynasty  was  established.  Mer- 
chants coming  to  the  capital  were  permitted  to  exchange 
specie  at  the  Government  Treasury  for  the  pien-ch'ien,  pay- 
able in  cash  on  demand  at  the  provincial  treasuries.  These 
certificates  became  current  and  very  popular.  Later,  issues 
were  made  expressly  for  general  circulation.  Interesting 
is  the  fact  that  the  government  managed  the  pien-ch'ien  with 
skill  approaching  that  of  the  modern  banker.  A  bureau 
attached  to  the  Treasury  was  created  to  issue  and  redeem 
the  pien-ch'ien.  These  certificates  were  issued  to  applicants 
promptly  and  measures  were  taken  to  secure  them  against 
depreciation.  For  instance,  the  responsible  officials  were 
liable  to  punishment  if  these  certificates  when  presented  for 
payment  were  not  promptly  redeemed.  During  the  early 
years  of  the  Sung  dynasty  until  the  invention  of  the  chiao- 
tze,  according  to  Ma  Tuan  Lin,  the  total  amount  in  actual 
circulation  at  any  time  did  not  exceed  2,830,000  kuan  (a 
kuan  is  nominally  1000  cash). 

It  was  in  the  province  of  Shu  (Szechuan)  that  pure 
paper  currency  developed  into  a  system.  The  geographic 
isolation  of  this  province  favored  the  rise  of  an  independent 
system.  This  province  had  more  than  once  been  an  inde- 
pendent state,  and  in  almost  everything  had  a  little  history 
of  its  own.  After  the  fall  of  Wang  Mang's  government 
there  was  a  state  of  confusion  all  over  the  country,  and  as  a 
result  Kung-sun   Shu  proclaimed   himself  first  Governor 


28l]  GOVERNMENT  PAPER  MONEY  21 

and  later  Emperor  in  this  province  (25  A.  D.).  During 
the  eleven  years  of  his  reign  he  put  into  circulation  an  iron 
currency.  Thereafter  it  appears  that  the  people  in  the 
province  of  Shu  had  used  only  iron  money.  The  invention 
of  paper  currency  is  told  in  a  striking  passage  in  Ma  Tuan 
Lin's  Resumi  of  Ancient  Currencies.  At  the  time  when 
Chang  Yung,  a  very  noted  administrator  of  this  dynasty, 
was  governor  of  Shu  the  people  were  much  discontented 
with  the  heavy  iron  coins  which  they  had  to  use.1  Sixteen 
wealthy  houses  formed  a  partnership,  or  "  guild,"  and 
issued  notes,  chiao-tze,  or  "  exchanges  ",  for  circulation.  In 
the  course  of  time  these  notes  practically  displaced  the  specie 
that  had  previously  been  found  in  circulation  and  became 
the  currency  of  Shu.  Confidence  in  the  issuers'  solvency 
together  with  the  intolerable  conditions  produced  by  the 
iron  currency  must  have  accounted  for  the  popularity  of 
these  notes. 

But  in  the  course  of  time,  the  sixteen  wealthy  houses  got 
into  trouble  with  their  creditors  and  the  people  discovered 
that  the  notes  did  not  actually  represent  specie.  There 
were  lawsuits.  After  much  deliberation  the  chiao-tze  was 
declared  inconvertible  paper  currency,  and  the  government 
took  over  the  right  of  issue  from  the  private  concern,  and 
vested  it  in  a  government  chiao-tze  office  established  in 
Yi-chow,  the  capital  city  of  the  province. 

Later,  the  central  government  began  to  issue  chiao-tze 
currency  notes  on  its  own  account.  By  the  first  year  of 
Tien-sheng  (1032)  the  issues  outstanding  at  a  given  date 
were  about  1,250,000  kuan  (or  1,256,340  kuan  exactly) 
and  the  government  kept  a  specie  reserve  of  360,000  kuan. 

1  Of  the  iron  money  in  Shu,  Lu  Tung-lai  says  {Ma  Tuan  Lin,  vol.  ix) 
that  it  weighed  25  catties  per  1000  pieces  for  the  large  ones  and  10 
catties  for  1000  small  ones,  and  that  it  was  the  only  currency  at  the 
time  when  chiao-tze  was  invented. 


22  THE  CURRENCY  PROBLEM  IN  CHINA  [282 

The  amount  of  issue  seems  to  have  been  restricted  to  the 
actual  demand  for  the  paper  currency  and  the  paper  was 
protected  carefully  against  depreciation. 

But  the  danger  of  depreciation  through  excessive 
issue  was  there.  When  the  prolonged  struggle  with 
the  Tartars  exhausted  the  government's  resources,  the 
government  resorted  to  the  issue  of  paper  currency  as 
a  means  of  raising  revenue.  Never  before,  as  far  as 
is  known,  had  a  Chinese  government  attempted  to  se- 
cure a  financial  gain  for  itself  from  the  authority 
over  the  monetary  system.  Excessive  issue  led  to  the 
depreciation  of  the  paper  currency  and  arbitrary  means 
were  devised  to  check  the  decline  and  even  to  restore  the 
paper  to  its  metallic  value.  Thus  it  was  made  a  rule  that 
when  among  the  people  business  was  transacted  to  the 
amount  of  10,000  cash,  or  10  kuan,  and  upwards,  half  of 
this  sum  must  be  paid  in  specie  and  the  other  half  in  the 
paper  currency.  It  was  thought  that  by  this  means  it 
would  be  difficult  for  the  people  to  ascertain  and  compare 
the  fluctuations  in  the  value  of  the  paper,  and  that  the  latter 
value  would  be  brought  back  to  equivalence  with  that  of 
the  metallic  money.  It  was  soon  found  that  all  these  arti- 
ficial methods  were  futile  to  check  depreciation  caused  by 
over-issue.  Ma  Tuan  Lin  states  that  there  was  in  circula- 
tion, at  the  time  when  the  Sung  seat  of  government  was 
moved  southward,  twenty  times  the  original  amount  fixed 
upon  as  the  actual  requirements  of  commerce,  and  that  the 
chiao-tze  fell  to  about  ten  per  cent  of  its  par  value.  The 
weakened  political  power  of  the  Sung  government,  in  the 
face  of  repeated  defeats  by  the  Chin  Tartars,  helped  to 
lessen  the  credit  of  the  paper  money. 

It  is  not  necessary  to  go  into  all  the  details  of  the  history 
of  the  paper  currency,  which  lasted  from  this  time  on  to  the 
Ming  dynasty.     All  the  experiences  in  America  and  France 


283]  GOVERNMENT  PAPER  MONEY  23 

with  inconvertible  paper  currency,  the  Chinese  people  had 
gone  through  centuries  ago.  In  the  monetary  history  of 
the  country  the  interesting  fact  cannot  escape  attention 
that  the  government  paper  currency  marked  the  transition 
from  the  ancient  regime  of  copper  and  iron  to  the  modern 
regime  of  silver  and  copper.  The  general  features  of  the 
paper  issues  of  the  subsequent  reigns  and  dynasties,  under 
one  name  or  another,  may  now  be  noticed. 

The  Southern  Sung  Paper  Currency  and  the  Chin  CKao 

From  the  reign  of  Kao-tsung,  1130,  till  the  conquest  of 
the  whole  country  by  the  Mongols,  China  was  separated  into 
two  halves,  the  Southern  Sung  dynasty  holding  the  southern 
half  and  the  Chin  Tartars  ruling  over  the  northern  half. 
They  were  constantly  at  war  with  each  other.  Both  issued 
inconvertible    paper    currency    for    purposes    of    revenue. 

I.  The  Southern  Sung  Dynasty.  In  1131  the  kuan-tze  or 
"  frontier-bills  "  were  issued  through  payment  of  the  troops 
stationed  on  the  frontiers.  These  bills  were  forced  into 
circulation  and  were  heavily  discounted.  There  were  like- 
wise tea-notes,  grain-notes  and  silk-notes,  exchangeable  for 
so  much  tea,  etc.,  as  was  expressed  on  the  note.  The  failure 
of  the  kuan-tze  led  to  a  reorganization  of  the  paper  currency 
and  to  a  new  variety  with  new  devices.  The  hui-tze,  one 
of  the  best  known  of  the  government  paper  currencies,  was 
invented  in  11 59. 

The  hui-tze  replaced  whatever  paper  there  was  then  in 
circulation.  It  was  in  four  denominations,  500,  300,  200  cash 
and  the  usual  one-kuan  note.  Public  dues  were  payable  in 
these  notes  at  par  value.  The  government  financiers  could 
not  get  away  from  the  erroneous  notion  that  the  disappear- 
ance of  the  metallic  currency  was  the  cause  of  the  deprecia- 
tion of  the  government  paper;  so  efforts  were  again  made 
to  regulate  the  methods  of  making  payments.     It  was  ac- 


24  THE  CURRENCY  PROBLEM  IN  CHINA  [284 

cordingly  decreed  that  in  the  receipt  of  public  dues  and  in 
public  disbursements  one-half  must  be  paid  in  specie  and  the 
other  half  in  paper,  except  in  those  places  remote  from  the 
main  waterways  where  taxes  and  tributes  might  all  be  re- 
ceivable in  the  hui-tze.  The  application  of  this  decree  was 
extended  to  all  business  transactions. 

The  government  manufactured  the  paper  for  the  currency 
notes.  These  notes  were  stamped  with  the  Treasury  seal 
before  they  were  put  into  circulation.  The  Treasury  seal 
gave  the  notes  the  character  of  fiat  money.  The  issue  of 
paper  currency  was  a  government  monopoly  and  forging 
notes  was  punishable  according  to  the  law  of  forging  state 
documents. 

When  the  paper  currency  became  excessive,  occasional 
conversions  were  made.  The  method  of  triennial  redemp- 
tion of  old  notes  by  a  new  series  was  followed.  Aside  from 
the  hui-tze  just  described  there  were  several  local  issues  un- 
der different  names  and  devices. 

The  Chuan  yin,  or  Szechuan  paper  notes,  almost  totally 
displaced  the  metallic  circulation  and  in  1161  reached  the 
enormous  sum  of  41,470,000  kuan.  The  total  amount  of 
iron  coins  was  said  to  be  no  more  than  700,000  kuan.  In 
Kia-ting's  reign,  1208,  the  Chuan  yin  was  worth  in  this 
province  40  per  cent  of  its  par  value  in  iron  money,  while 
outside  this  province,  where  copper  money  was  in  circulation, 
the  paper  currency  was  worth  17  per  cent  of  its  par  value. 

Towards  the  close  of  the  Southern  Sung  dynasty  when 
the  finances  of  the  state  were  in  dire  straits  the  paper  cur- 
rency on  account  of  excessive  issue  was  in  a  state  of  rapid 
decline.  When  the  value  of  the  paper  became  low,  a  greater 
quantity  had  to  be  issued  and  forced  into  circulation  in  order 
to  get  the  needed  amount  of  supplies.  In  1263  a  last  effort 
was  made  to  revive  the  paper  currency  and  the  kuan-tze  was 
again  resorted  to.     It  was  issued  in  exchange  for  the  hui-tze. 


285]  GOVERNMENT  PAPER  MONEY  25 

There  were  both  silver  and  copper  kuan-tze.  But  mean- 
while the  Mongols  had  already  conquered  the  Chin  domin- 
ions and  in  1279  the  Southern  Sung  dynasty  came  to  an  end. 
II.  The  Chin  Tartars.  The  Chin  Tartars  in  Northern 
China  followed  the  Sung  paper-currency  system.  The  Chin 
paper  currency,  likewise  inconvertible,  was  called  ch'ao, 
a  name  subsequently  adopted  to  denote  both  government 
paper  currency  and  banknotes  quite  indiscriminately.  The 
Chin  ch'ao  was  of  many  denominations,  ten  in  number, 
namely,  10,000,  5000,  3000,  2000,  and  1000  cash  notes  "  for 
use  in  large  payments",  and  700,  500,  300,  200,  100  cash 
notes  "  for  use  in  small  payments  ",  or,  in  other  words,  as 
subsidiary  currency.  The  ch'ao  notes  were  redeemable  in 
a  new  series  once  in  every  seven  years,  at  the  charge  of 
15  cash  per  note.  The  system  in  the  Chin  dominions  was 
more  centralized  than  in  the  Southern  Sung  Empire.  Both 
the  ch'ao  and  the  paper  currency  of  Southern  Sung  were 
repudiated  when  the  Mongols  conquered  and  united  China 
under  the  new  dynasty,  the  Yuan  dynasty. 

The  Yuan  Dynasty  Paper  Currency 

The  Yuan  dynasty  lasted  88  years  (1279-1367).  The 
pao  ch'ao,  or  "  precious  notes  ",  were  decreed  the  sole  legal 
currency  in  which  all  prices  must  be  fixed,  in  the  third  year 
of  Kublai  Khan,  1260,  which  was  before  the  Mongols  had 
completed  their  conquest  of  the  Chinese  Empire.  Exchange 
offices  were  established  in  all  commercial  centres,  where  worn- 
out  notes  were  redeemed  in  new  ones  at  an  arbitrary  charge, 
usually  three  per  cent  of  the  par  value  of  the  note.  Taxes 
and  dues  were  payable  in  these  notes.  The  paper  currency 
issued  in  this  period  was  known  as  the  series  of  Chungtung 
and  the  notes  were  in  ten  denominations  ranging  from  10 
to  2000  cash. 


26  THE  CURRENCY  PROBLEM  IN  CHINA  [286 

A  very  interesting  contemporary  account  of  the  paper 
currency  given  by  Marco  Polo  may  be  quoted.1 

With  regard  to  the  money  of  Kambulu,2  the  great  Khan  may 
be  called  a  perfect  alchemist,  for  he  makes  it  himself.  He 
orders  to  collect  the  bark  of  a  certain  tree,  whose  leaves  are 
eaten  by  the  worms  that  spin  silk.  The  thin  rind  between  the 
bark  and  the  interior  wood  is  taken,  and  from  it  cards  are 
formed  like  those  of  paper,  all  black.  He  then  causes  them  to 
be  cut  into  pieces,  and  each  is  declared  worth  respectively  half 
a  liver,  a  whole,  a  silver  grosso  Venice,  and  so  on  to  the  value 
of  10  bezants.  All  these  cards  are  stamped  with  his  seal,  and 
so  many  are  fabricated  that  they  would  buy  all  the  treasures 
in  the  world.  He  makes  all  his  payments  in  them,  and  circu- 
lates them  through  the  kingdoms  and  provinces  over  which  he 
holds  dominion;  and  none  dares  to  refuse  them  under  pain  of 
death.  All  the  nations  under  his  sway  receive  and  pay  this 
money  for  their  merchandise,  gold,  silver,  and  precious  stones, 
and  whatever  they  transport,  buy  or  sell.  The  merchants  often 
bring  to  him  goods  worth  400,000  bezants,  and  he  pays  them 
all  in  these  cards,  which  they  willingly  accept,  because  they  can 
make  purchases  with  them  throughout  the  whole  Empire.  He 
frequently  commands  those  who  have  gold,  silver,  clothes  of 
silk  and  gold,  or  other  precious  commodities,  to  bring  them  to 
him.  Then  he  calls  12  men  skillful  in  these  matters,  and  com- 
mands them  to  look  at  these  articles  and  fix  their  price.  What- 
ever they  name  is  paid  in  these  cards,  which  the  merchant  cor- 
dially receives.  In  this  manner  the  great  sire  possesses  all  the 
gold,  silver,  pearls  and  precious  stones  in  his  dominions.  When 
any  of  the  cards  are  torn  or  spoiled,  the  owner  carries  them 
to  the  place  whence  they  were  issued  and  receives  fresh  ones, 
with  a  reduction  of  3  per  cent.  If  a  man  wishes  gold  or  silver 
to  make  plate,  girdles,  or  other  ornaments,  he  goes  to  the  office, 
carrying  a  sufficient  number  of  cards,  and  gives  them  in  pay- 

1  Murray's  Polo,  p.  137.    Also  Sir  Henry  Yule's  Polo,  bk.  ii,  chap.  24. 
2Kambulu,  namely,  Peking. 


287]  GOVERNMENT  PAPER  MONEY  2J 

ment  for  the  quantity  which  he  requires.  This  is  the  reason 
why  the  Khan  has  more  treasure  than  any  other  lord  in  the 
world;  nay,  all  the  princes  in  the  world  together  have  not  an 
equal  amount. 

Besides  this  passage  Marco  Polo  frequently  mentions  the 
circulation  of  the  ch'ao  in  those  places  where  commerce  was 
flourishing. 

In  1284  a  new  series,  called  pao  ch'ao  of  Chihyuan,  was 
issued.  These  new  notes  were  exchangeable  for  those  of 
the  Chungtung  variety  at  the  rate  of  1  to  5,  in  other  words, 
one  note  of  the  new  series  was  to  exchange  for  five  of  the 
previous  series  of  equal  nominal  value.  Sir  Henry  Yule 
estimates  that  during  the  34  years  when  Kublai  reigned  the 
lowest  issue  was  228,960  kuan  in  1269  and  the  highest  was 
50,002,500  kuan  in  1290,  while  the  total  amount  during 
the  34  years  reached  the  enormous  sum  of  249,654,290 
kuan.1 

The  third  and  last  series  issued  by  the  Mongols  was 
known  as  the  pao  ch'ao  of  Chihta  (1310).  These  were 
silver  notes  exchangeable  for  those  of  the  Chihyuan  series 
at  the  rate  of  one  to  five  and  for  those  of  the  Chungtung 
series,  1  to  25.  One  tael  silver  and  one  kuan  cash  (nomin- 
ally 1000)  were  used  as  nominally  equivalent  in  value. 

The  Mongol  Conquest  opened  the  country  to  extensive 
commercial  relations  with  other  parts  of  the  Asiatic  conti- 
nent and  the  tea  and  silk  trades  brought  into  the  country  a 
steady  importation  of  silver.  The  use  of  silver  as  currency 
was  rapidly  extended  under  this  dynasty.     The  familiar 

1  Yule,  op.  cit.y  p.  427,  footnote.  The  currency  notes  have  often  been 
called  banknotes.  To  me  this  seems  to  be  a  misnomer,  for  they  are 
inconvertible  paper  money  pure  and  simple.  Between  the  two  kinds  of 
credit  money  there  is  a  fundamental  difference.  Samples  of  the  Ming 
ch'ao  are  not  rare  to-day.  There  is  one  reproduced  in  Yule's  Polo. 
Vissering's  book  also  contains  a  reproduction. 


28  THE  CURRENCY  PROBLEM  IN  CHINA  [28g 

units  of  weight,  the  Hang,  or  tael,  and  the  ting,  l  were  used 
as  the  silver  currency  units.  With  the  downfall  of  the 
Yuan  dynasty  and  the  subsequent  repudiation,  the  regime 
of  paper  currency  was  practically  closed,  though  the  Ming 
rulers  never  completely  gave  it  up. 

The  Ming  Dynasty  Paper  Currency 

Ming  Tai-tsu  sought  to  re-establish  the  paper  currency 
and  in  1367  decreed  that  the  coins  minted  by  the  govern- 
ment mints  and  the  paper  currency,  the  Ming  ch'ao,  were 
to  circulate  side  by  side  at  par  and  no  discrimination  was 
to  be  shown  in  favor  of  one  as  against  the  other,  but  both 
were  to  be  legal  money.  But  no  sooner  were  the  new  ch'ao 
notes  issued  than  they  were  heavily  discounted  and  soon 
they  were  worth  only  5  per  cent  of  their  nominal  value.  In 
spite  of  all  artificial  regulations  the  efforts  to  maintain  their 
value  were  unsuccessful.  Silver  was  looked  upon  with 
suspicion  and  was  regarded  as  the  cause  of  the  failure  of 
the  paper  currency,  and  accordingly  Ming  Tai-tsu  issued  a 
decree  prohibiting  the  use  of  silver  as  currency.  Repeated 
abuses  of  the  credit  of  the  government  at  last  destroyed  all 
popular  confidence  in  the  government's  good  faith.  Though 
many  further  attempts  were  made  to  re-establish  the  paper 
circulation  in  the  subsequent  reigns  of  this  dynasty  popu- 
lar suspicion  that  the  same  course  of  depreciation  followed 
by  repudiation  might  be  the  outcome  was  sufficient  to 
render  all  those  efforts  futile. 

The  Manchu,  or  Ch'ing  dynasty  was  established  in  1644 
and  during  the  first  few  years  of  Shun-chih's  reign  it  ap- 
pears that  on  attempt  was  again  made  to  issue  paper  cur- 
rency in  very  much  the  same  way  as  it  had  been  issued  in 
the  previous  dynasties.     The  chronicles  show  that  about 

1  A  ting  is  nominally  50  taels. 


289]  GOVERNMENT  PAPER  MONEY  2g 

120,000  kuan  per  annum  was  issued  for  some  time  but  this 
practice  was  soon  given  up.  Paper-currency  issues  were 
subsequently  condemned  by  the  Manchu  House  and  in  181 5 
during  the  Emperor  Kia-ching's  reign.  Ts'ai  Chih-ting,  one 
of  the  Ministers  of  State,  was  severely  rebuked  for  advo- 
cating its  revival.  However  the  past  experiences  were 
easily  forgotten  in  time  of  financial  straits  and  during  the 
Tai  Ping  Rebellion  paper  money  was  again  resorted  to  as  a 
means  of  raising  revenue.  Currency  notes  in  the  reign 
of  Hsien-feng  of  1,3,  5,  10,  and  50  teals  silver  and  of  500, 
1000,  1500  and  2000  cash  (copper)  were  forced  into  circu- 
lation (1856).  They  rapidly  depreciated  and  were  soon 
worth  next  to  nothing.  As  before  the  government  repu- 
diated these  notes. 

The  ancient  records  are  fragmentary  and,  in  many  places, 
vague  and  obscure  in  their  meaning.  In  the  above  general 
survey  practically  all  that  is  of  any  importance  about  the 
metallic  and  paper  currencies  of  the  past  is  included. 


CHAPTER  III 
Currency  Conditions  in  Modern  China 

The  currency  of  modern  China  cannot,  properly  speak- 
ing, be  called  a  system.  It  is  composed  of  a  number  of  sys- 
tems. There  is  the  cash  coinage;  the  currency  of  silver 
bullion  based  on  the  tael  unit;  silver  coins,  the  dollars  of 
foreign  as  well  as  of  provincial  mintage;  and  finally  there 
are  the  minor  silver  coins,  fractional  parts  of  the  dollar 
circulating  independently  of  the  unit  and  with  no  limita- 
tions upon  their  legal-tender  quality.  We  may,  however, 
regard  the  currency  as  on  a  bimetallic  basis  with  the  copper 
cash  and  the  silver  tael  as  the  units.  This  must  not  be  mis- 
taken for  real  bimetallism.  Bimetallism  in  the  sense  in 
which  it  is  understood  in  the  West  requires  free  coinage  of 
two  metals  (gold  and  silver)  both  of  which  are  legal  tender, 
with  a  fixed  ratio  between  the  units  of  coinage.  The  two 
metals  in  the  Chinese  currency,  on  the  contrary,  are  inde- 
pendent of  each  other  and  circulate  without  a  fixed  exchange- 
ratio  between  them.  The  cash  is  a  standard  coin;  the  tael 
an  uncoined  unit  of  weight.  There  is  a  tradition  that  the 
cash  was  intended  to  be  in  value  the  equivalent  of  one-thou- 
sandth of  a  silver  tael,  but  such  a  notion  has  at  no  time  any 
practical  validity  since  the  exchange  between  the  two  units 
depends  generally  upon  their  values  as  metals  in  the  market. 

I.  The  Cash.  According  to  one  authority  the  standard 
weight  of  this  coin  should  be  57  grains  of  the  metal  of  which 
it  is  made — copper  and  as  much  spelter  or  zinc  (sometimes 
30  r^9o 


291]     CURRENCY  CONDITIONS  IN  MODERN  CHINA  $1 

lead)  as  the  copper  will  take  up.1  According  to  another 
writer  2  the  cash  is  described  as 

a  circular  coin  rather  more  than  an  inch  in  diameter  with  a 
square  hole  in  the  middle  for  the  convenience  of  stringing.  It 
should  consist  of  an  alloy  of  copper,  50% ;  zinc,  41^2 ;  lead, 
6^2 ;  tin,  2 ;  or  of  equal  parts  of  copper  and  zinc.  Each  piece 
should  weigh  58  grains  troy,  or  3.78  grams;  but  these  stand- 
ards of  composition  and  weight  are  not  free  from  counterfeit- 
ing and  the  cash  in  circulation  would  not  measure  up  to  them 
generally. 

Of  the  issues  of  the  Manchu  dynasty,  those  of  the  reigns 
of  Shun-chih  (1 644-1661),  K'ang-hsi  (1661-1721)  and 
Yung-cheng  (1 721-1735),  as  they  are  now  found  in  actual 
circulation,  are  larger  and  of  better  quality  than  those  of 
Ch'ien-lung  (1735-1795),  Chia-ch'ing  (1795-1820)  and 
Tao-kuang  (1820-1850),  all  of  which  are  superior  to  the 
issues  of  the  later  reigns  both  in  substance  and  in  size.  The 
issues  of  previous  dynasties  are  found  in  circulation  in  con- 
siderable numbers,  mostly  defaced  and  much  worn.  The 
K'ai  Yuan  coins  issued  in  the  Tang  dynasty  are  by  no  means 
rare,  and  have  formed  part  of  the  every-day  currency  of 
the  people  for  twelve  centuries.  Those  of  the  Tai  Ping 
rebel  government  are  not  at  all  discriminated  against. 
Counterfeiting  practices  are  so  common  that  they  have 
been  one  of  the  chief  causes  of  frequent  price  inflations  in 
local  markets  and  counterfeit  coins  are  usually  accepted 
without  question. 

The  following  three  causes  may  therefore  account  for  the 
lack  of  uniformity  in  weight  and  in  size  of  the  cash  coins : 

First.     Concurrent  circulation  of  issues  of  many  reigns 

1  Dr.  G.  Morrison,  in  The  London  Times  Fin.  and  Com.  Supplement, 
Mar.  13,  1905. 

2  T.  Jernigan,  China's  Business  Methods,  p.  80. 


32  THE  CURRENCY  PROBLEM  IN  CHINA  [292 

of  the  Manchu  dynasty  with  the  survivals  of  issues  of  pre- 
ceding centuries. 

Second.  The  crude  method  of  coining  which  rendered 
uinformity  impossible,  particularly  when  the  cash  mints 
were  not  under  the  control  and  management  of  one  central 
authority. 

Third.  The  circulating  of  many  counterfeit  coins.  Until 
recently,  the  cash  has  always  been  cast  in  moulds  which 
made  counterfeiting  quite  easy. 

In  ordinary  transactions  no  discrimination  is  made  on  ac- 
count of  these  differences,  and  even  the  counterfeit  coins, 
unless  they  reach  a  considerable  proportion  of  the  circula- 
tion, pass  comfortably  as  regular  coins.  For  these  reasons 
the  cash  may  be  considered  a  coin  of  universal  acceptability. 
Except  in  the  trade  centres  it  is  the  only  currency. 

The  Peking  cash  currency.  During  the  second  half  of 
the  last  century  Peking  had  a  currency  of  its  own  which  was 
not  demonetized  until  a  few  years  ago  (1907)  and  which 
deserves  special  mention.  This  consisted  of  the  debased  and 
depreciated  10-cash  pieces. 

The  Peking  10-cash  coin  had  a  little  history  of  its  own. 
It  dated  back  to-  the  time  of  the  Tai  Ping  Rebellion  when 
the  supply  of  copper  from  Yunnan  was  cut  off.  The  cur- 
rency notes  mentioned  in  the  previous  chapter  were  issued 
at  this  time  (1856)  in  Hsien-feng's  reign.  Partly  for  pur- 
poses of  raising  money  and  partly  in  order  "  to  continue 
the  manufacture  of  cash  "  the  Government  issued  many 
token  coins  of  5,  10,  50,  500  and  1,000  cash  pieces.  Iron 
coins  were  also  minted.  These  coins  never  gained  a  cir- 
culation outside  Peking,  though  it  is  said  that  some  pro- 
vincial mints  also  made  them.  These  token  coins  caused 
considerable  business  disturbances  in  the  capital.  All  of 
them  became  depreciated  and  soon  all  but  the  10-cash  pieces 
disappeared.     The  latter  became  the  cash  currency  of  Pe- 


293]     CURRENCY  CONDITIONS  IN  MODERN  CHINA  33 

king,  the  regular  coins  having  meanwhile  been  displaced  by 
the  depreciated  coins.  The  10-cash  piece  circulated  at  the 
depreciated  valuation  of  2-cash.  The  coinage  of  multiples 
of  the  cash  had  frequently  been  resorted  to  in  previous  dyn- 
asties. As  will  presently  appear,  the  Peking  cash  was  re- 
placed by  the  new  copper  coinage  in  1907. 

The  tiao.  Cash  currency  is  reckoned  in  terms  of  tiao,  of 
nominally  1,000  coins.  Through  an  age-long  practice  of 
discounting  and  rediscounting  the  tiao  has  come  to  be  quite 
different  from  what  it  had  been  meant  to  be.  As  it  is  used 
to-day  the  tiao  varies  widely  among  the  different  districts. 
For  instance,  it  is  490  coins  in  Tientsin  (one  counting  as 
two,  and  49  coins  passing  as  100).  In  Lanchow  and  all  the 
eastern  section  of  the  country  the  tiao  represents  from  160 
to  163  coins,  16  usually  passing  as  100.  In  Peking  when  the 
depreciated  cash  currency  was  in  use  49  to  50  passed  as 
1,000  (one  coin  counting  as  two  and  the  cash  being  the 
depreciated  10-cash  coins).  In  Yunnan  city  in  southwestern 
China  the  same  confusion  of  the  cash  currency  prevails. 
In  Yunnan  city  the  tiao  consists  of  620  coins,  62  here  pass- 
ing as  a  nominal  100,  while  outside  the  city  the  tiao  repre- 
sents 980  coins,  98  passing  as  a  nominal  100.  Just  what 
this  involves  may  be  seen  from  the  following  illustration : x 

This  part  of  Hupei  province  has  long  been  distinguished  for 
its  variety  of  rates  of  exchange.  A  nominal  100  cash  has  for 
a  long  time  been  97  in  actual  cash  at  Wusueh,  98  at  Lungping, 
97  or  98  in  different  classes  of  transactions  at  Hsiangkuo,  90 
miles  away,  and  99  at  Chi-chow,  the  same  distance  away  in 
another  direction.  To  complicate  matters,  the  only  cash  bills 
which  are  popular  are  issued  by  a  Wusueh  bank  and  are  cur- 
rent in  all  these  towns,  but  not  at  face  value.  At  Wusueh  a 
bill  equals  1000  cash  (one  tiao).  At  Lungping  one  has  to  give 
10  cash  and  a  bill  for  1000,  and  at  Chi-chow  one  must  add  20 
cash  to  the  bill. 

1  North  China  Daily  News,  May  11,  1906. 


34  THE  CURRENCY  PROBLEM  IN  CHINA  [294 

This  particular  district  is  not  exceptional  but  rather  typi- 
cal of  the  local  currency  conditions.  Much  more  might  be 
said  of  the  tiao,  but  the  preceding  suffices  to  show  that  one 
is  likely  to  commit  all  kinds  of  miscalculations  in  converting 
the  currency  of  one  locality  into  that  of  another.  That  such 
inconvenience  hinders  the  proper  development  of  trade  is 
obvious 

II.  The  Silver  Currency.  The  establishment  of  the  silver 
currency  has  been  gradual,  even  to-day  in  the  interior 
regions  cash  is  almost  the  sole  currency.  Silver  was  first 
introduced  as  currency  in  commerce  during  the  paper  cur- 
rency regime,  though  without  the  sanction  of  the  govern- 
ment. It  is  impossible  to  determine  the  date  of  this  inno- 
vation even  approximately.  History  tells  us  that  Ming 
Tai-tsu,  1367,  in  order  to  maintain  the  paper  currency  at- 
tempted to  prohibit  the  use  of  silver  currency.  Nevertheless, 
silver  came  into  extensive  use  as  currency  under  the  Ming 
dynasty,  and  since  the  establishment  of  the  Manchu  dynasty 
most  large  transactions  and  Treasury  operations  have  been 
conducted  in  silver. 

A  great  deal  of  the  silver  stock  in  China  came  from  for- 
eign commerce.  Direct  foreign  trade  with  the  Western 
countries  began  at  Canton  in  15 16,  first  with  the  Portuguese. 
During  the  early  years,  the  tea  and  silk  trades  brought  into 
China  a  steady  importation  of  silver.  Mr.  H.  B.  Morse 
estimated  that  the  imports  of  goods  never  equaled  the  ex- 
ports of  tea  and  silk  during  the  eighteenth  century;  indeed, 
that  such  imports  never  amounted  to  one-fifth  of  the  ex- 
ports. The  balance  was  always  paid  in  silver.  He  estimated 
that  the  total  importation  of  silver  into  China  from  1700  to 
1830  could  not  be  less  than  $5 00,000,000. *    With  the  ex- 

1  Statistical  Secretary  of  the  Chinese  Maritime  Customs.  China  and 
the  Far  East,  Clark  Univ.  Lectures,  1910,  pp.  96-97. 


295]     CURRENCY  CONDITIONS  IN  MODERN  CHINA  35 

pansion  of  the  opium  trade  the  balance  began  to  be  paid  in 
opium.  In  1837,  shortly  before  the  Opium  War,  opium 
constituted  57  per  cent  of  the  total  value  of  the  imports  at 
Canton.1  Later  in  the  nineteenth  century,  when  conditions 
differed  from  previous  times,  the  importation  of  silver  con- 
tinued on  a  large  scale.  Sir  Rober  Giffen  2  gave  some  inter- 
esting facts  about  the  movement  of  the  precious  metals  be- 
tween China  and  other  nations  before  the  British  "  Royal 
Commission  on  Gold  and  Silver  "  in  1886.  After  an  exami- 
nation into  the  statistics  of  the  chief  countries  with  which 
China  trades,  he  found  that  China  exported  on  balance  to 
the  chief  commercial  countries  it  trades  with  every  year 
from  about  £1,000,000  to  £2,000,000  sterling  of  gold.  He 
found  that  the  export  of  gold  was  a  little  over  £1,000,000 
on  the  average  for  the  years  1864  to  1886.  As  to  the  silver, 
he  found  that  concurrently  with  the  export  of  gold  China 
was  importing  silver  and  that  there  was  an  excess  of  im- 
ports over  exports  of  silver.  This  excess  was  £5,300,000 
in  1877,  the  largest  balance  of  the  twenty-seven  years  he 
studied.8  From  this  statistical  evidence  it  appears  that 
China  has  been  a  regular  silver-importing  country  and  has 
exported  a  considerable  amount  of  her  gold. 

The  tael  unit.  The  silver  currency  unit  is  the  tael,  deci- 
mally divided  into  mace,  candareens,  etc.  The  tael  in  the 
Chinese  system  is  a  measure  of  weight  as  well  as  a  money 
of  account.  Through  lack  of  governmental  regulation,  the 
tael  has  come  to  be  in  the  course  of  time  very  irregular  in 
weight.  Again,  the  purity  of  the  silver  bullion  is  liable  to 
variation.    Thus  commercial  usages  have  come  to  recognize 

1  China  and  the  Far  East,  Clark  Univ.  Lectures,  1910,  p.  100. 
a  Royal  Com.  on  Gold  and  Silver,  Minutes  of  Evidence,  p.  21. 
9  Ibid.,  p.  29  and  pp.  314-15.    Figures  for  1858-85. 


36  THE  CURRENCY  PROBLEM  IN  CHINA  [2g6 

several  degrees  of  fineness  in  the  bullion  in  every  important 
market.  The  weighing  and  testing  of  the  bullion  involve 
not  only  loss  of  time  but  danger  of  inaccuracy.  Of  course, 
modern  nations  in  the  West  have  got  over  this  difficulty 
by  means  of  coinage.  The  coins  are  minted  by  the  Govern- 
ment and  each  contains  a  fixed  amount  of  metal  of  an  in- 
variable degree  of  fineness.  All  the  trouble  of  the  use  of 
bullion  is  thus  done  away  with.  The  Chinese  Government 
has  never,  until  recent  years,  attempted  to  coin  silver. 

Nor  has  any  attempt  been  made  until  recently  to  define 
the  exact  weight  of  the  tael  and  to  introduce  uniformity  in 
the  standard  by  government  action.  The  Treasury  has  one 
standard,  the  Ku'p'ing  tael.  Each  city  or  commercial  guild 
has  practically  one  for  its  own  use,  and  when  duties  on  im- 
ports were  to  be  levied  according  to  commercial  treaties  a 
Customs  tael,  or  Haikuan  tael,  different  from  all  the  rest, 
was  adopted  as  a  money  of  account.  This  lack  of  uni- 
formity in  the  weight  and  value  of  the  tael  is  by  no  means 
exceptional  among  Chinese  measures.  The  units  of  weight, 
of  capacity,  and  length  all  vary  from  use  to  use  and  from 
place  to  place.  The  catty  may  be  taken  as  an  example.  The 
catty  (16  taels  in  weight)  weighs  exactly  one  and  one-third 
pounds  on  the  scales  of  the  Maritime  Customs.  In  Shang- 
hai the  following  measures  are  found :  in  foreign  dealings 
the  catty  is  20.4  oz. ;  the  regular  "  guild  "  catty  is  19.7  oz. ; 
the  catty  for  rice  for  the  grain  tribute  is  20.6  oz. ;  in  the  sale 
of  oil  it  is  23.2  oz. ;  in  the  sale  of  sugar  it  is  27.25  oz.1  As 
a  similar  state  of  affairs  prevails  in  almost  all  of  the  centres 
of  trade,  the  variations  of  this  one  measure  of  weight  can 
be  imagined. 

The  following  account  showing  the  nature  of  the  silver 
tael  currency  in  the  city  of  Chungking  is  taken  from  the 

1  London  Times,  June  5,  1905. 


297]     CURRENCY  CONDITIONS  IN  MODERN  CHINA  37 

Times,1  and  is  true  more  or  less  of  all  the  trade  centres  of 
the  country : 

Here  (in  Chungking)  the  standard  weight  of  the  tael  for 
silver  transactions  is  543.7  grains,  and  this  is  the  standard  for 
all  transactions  in  which  the  scale  is  not  specified.  Usually, 
however,  a  modification  is  provided  for,  depending  in  some 
cases  upon  the  place  from  which  the  merchant  comes  or  with 
which  he  trades,  and  in  others  upon  the  goods  in  which  he 
deals.  A  merchant  coming  from  Kweichow,  or  trading  with 
that  place,  will  probably,  but  not  certainly,  use  a  scale  on  which 
the  tael  weighs  537.2  grains ;  a  merchant  from  Kwei-fu,  a  town 
on  the  Yangtze,  a  hundred  miles  from  Chungking,  will  buy 
and  sell  with  a  tael  of  550.7  grains;  and  between  these  two 
extremes  are  at  least  ten  topical  [sic]  weights  of  tael  all  "  cur- 
rent "  at  Chungking.  In  addition  to  these  twelve  topical  cur- 
rencies "  there  are  others  connected  with  commodities.  One 
of  the  most  important  products  of  Szechuan  is  salt,  and  deal- 
ings in  this  are  settled  by  a  tael  of  544.5  grains,  unless  it  is 
salt  from  the  Tze-liu  well,  in  which  case  the  standard  is  545.7 
grains.  A  transaction  in  cotton  cloth  is  settled  with  a  tael  of 
543.1  grains,  but  for  cotton  yarn  the  tael  is  544.1,  and  for  raw 
cotton  the  tael  is  536.0  grains. 

This  seems  confusion,  but  we  are  not  yet  at  the  end.  Up  to 
this  point  we  have  dealt  only  with  the  weight  of  the  scale,  but 
now  comes  in  the  question  of  the  fineness  of  the  silver  with 
which  payment  is  made.  At  Chungking  three  qualities  of  silver 
are  in  common  use — "  fine  silver  "  1000  fine  current  through- 
out the  Empire,  "  old  silver  "  about  995  fine,  and  "  trade  sil- 
ver "  between  960  and  970  fine ;  and  payment  may  be  stipulated 
in  any  one  of  these  three  qualities.  Taking  the  score  of  cur- 
rent tael  weights  in  combination  with  the  three  grades  of  silver, 
we  have  at  least  60  currencies  in  this  one  town. 

The  three  principal  taels  are  the  K'up'ing,  or  Treasury 

1  London  Times,  March  13,  1905.  Cf.  H.  B.  Morse,  The  Trade  and 
Administration  of  the  Chinese  Empire  (1907),  p.  145. 


38  THE  CURRENCY  PROBLEM  IN  CHINA  [298 

tael,  the  Haikuan,  or  Customs  tael,  and  the  Shanghai  tael, 
which  is  the  tael  for  international  trade. 

The  K'up'ing  tael.  The  Board  of  Revenue  tael  contains 
575.8  grains  of  silver,  1000  fine,1  and  on  this  basis  100  HK. 
taels  =  101.642335  KP.  taels.  The  K'up'ing  tael  compared 
with  the  Shanghai  tael  is  in  the  ratio  of  100  K'up'ing  to 
109.60  Shanghai  taels.2 

The  Haikuan  tael.  As  the  term  denotes,  this  is  the  tael 
used  in  the  payment  of  tariff  duties  fixed  in  1842.  It  is  1000 
fine,  containing  583.3  grains;  but  it  is  a  purely  theoretical 
unit,  adopted  as  a  money  of  account.  Though  the  duties  are 
calculated  in  this  unit,  they  are  paid  in  the  locally  current 
tael  to  a  bank  designated  as  a  "  customs  bank  ",  at  a  rate  of 
conversion  officially  fixed  upon.  Thus  at  the  Shanghai  port, 
for  every  100  HK.  taels  the  merchant  pays  11 1.40  Shang- 
hai taels;3  at  Ningpo  at  the  rate  of  1.0583  Chiang-ping 

1  The  Kuping  fine  silver  is  commercially  1000  fine.  It  is  987-985  chem- 
ically pure  silver. 

Mr.  H.  B.  Morse,  who  is  perhaps  the  best  known  authority  on  the 
tael  currency  system,  treats  quite  extensively  in  his  writings  cited  here 
the  weight  and  value  of  the  different  kinds  of  tael  currencies.  The 
rate  of  conversion  of  the  HK.  tael  into  the  Shanghai  tael  is  obtained 
in  this  manner: 

100  HK.  taels  =  111.40  Shanghai  taels: 

weight  on  local  scale  100.    0.0.0 

add  for  difference  in  weight      2.    8.0.0 
add  for  touch  6.    1.6.8 

add  for  melting  expenses  o.    2.0.4 


Divide  by  the  "  Shanghai  Convention "       109.     1.7.2 
an  understanding  by  which  98  taels 
settle  a  liability  of  100  taels  0.98 


1 1 1.40 
1  Morse,    The    Trade   and   International  Relations   of   the   Chinese 

Empire  (1908),  p.  160. 
»  Dr.  J.  C.  Ferguson,  "The  Chinese  Banking  System  in  Shanghai," 

N.  C.  Daily  Herald,  pp.  473-498,  March  2,  1906. 


299]     CURRENCY  CONDITIONS  IN  MODERN  CHINA         39 

tael  to  1  HK.  tael;1  at  Tientsin,  105  Hangping  taels  for 
every  100  HK.  taels; 2  and  so  on. 

The  Shanghai  tael.  This  is  the  standard  of  international 
exchange  for  the  trade  of  Northern  China  and  the  Yangtze 
valley.  The  par  of  exchange  is  found  from  this  tael  and 
the  London  price  of  bar  silver  and  is  given  by  Mr.  Morse 
as  follows :  In  the  Shanghai  tael  are  contained  524.93  grains 
of  fine  silver.  An  ounce  of  British  standard  (925)  silver 
contains  444  grains  of  fine  silver.  The  par  of  silver  ex- 
change is  found  by  dividing  the  London  price  by  0.864.8 

A  great  deal  more  might  be  said  about  the  tael  currency 
system,  but  what  has  been  given  suffices  to  show  the  var- 
iableness of  this  monetary  unit  and  the  causes  of  the  varia- 
tions. The  result  of  employing  uncoined  silver  currency 
with  such  an  imaginary  currency  unit  has  been  most  unsatis- 
factory. No  other  single  factor  has  been  so  great  a  hind- 
rance to  the  development  of  the  internal  commerce  of  the 
country  and  trade  relations  with  the  outer  world.  Higgling 
not  only  about  the  quantity  but  also  about  the  quality  of 
silver  forms  an  essential  part  of  legitimate  business,  and 
when  a  merchant  trades  with  distant  places  careful  deduc- 
tions and  fine  calculations  about  the  currency  are  necessary 
in  order  to  prevent  making  mistakes.  Furthermore,  the 
rate  of  exchange  between  this  silver  currency  and  the  cash 
currency  is  a  fluctuating  one,  there  being  no  fixity  between 
these  two  standards.  Under  these  circumstances  the  busi- 
ness of  money-changing  has  become  a  very  lucrative  trade. 
The  money-changers  perform  the  useful  function  of  con- 
verting one  currency  into  another,  in  order  that  purchases 
can  be  made  with  the  money  that  is  "  current  "  in  such  pur- 

1  Commissioner  E.  B.  Drew  to  Sir  Robert  Hart  (1878),  Report  of  the 
Int.  Exc.  Comm.,  1904,  p.  216. 
2Detring  to  Hart  (1878),  ibid.,  p.  211. 
s  H.  B.  Morse,  op.  cit.,  p.  161. 


40  THE  CURRENCY  PROBLEM  IN  CHINA  [300 

chases.  Dr.  Morrison,  in  the  series  of  articles  already  re- 
ferred to,  sums  up  the  situation  by  declaring  that  "  Germany 
a  century  ago  was  a  paradise  of  money  changers,  with  its 
countless  coinages  each  circulating  in  its  own  principality; 
but  that  was  simplicity  itself  compared  with  China."  *  To 
those  who  are  conversant  with  the  intricacies  of  the  Chinese 
currency  this  is  but  a  mild  statement  of  facts. 

III.  Foreign  Dollars.  Foreign  dollars  found  their  way 
into  China  in  the  course  of  centuries  of  coast  trade.  The 
history  of  the  dollar  is  a  very  interesting  one.  It  is  said 
that  the  Portuguese  and  the  Spanairds  brought  dollars  into 
China  as  early  as  the  seventeenth  century.  These  coins 
soon  gained  popularity,  and  later  the  East  India  Company 
imported  dollars  with  which  they  bought  tea  and  silk.2  The 
early  trade  relations  were  carried  on  almost  exclusively 
through  Canton  city,  and  that  port  by  an  edict  issued  in 
1757  was  ma-de  the  sole  trading-post.  It  remained  so  until 
after  the  Opium  War. 

The  coin  that  gained  the  greatest  popularity  in  the  early 
foreign  trade  was  the  carolus  dollar  of  the  reign  of  Charles 
IV  (1788- 1 808)  of  Spain.  Speaking  of  the  American  trade 
in  the  early  nineteenth  century,  Mr.  H.  B.  Morse  says  that 
American  products  were  shipped  to  Europe,  and  there  sold ; 
the  proceeds  in  Spanish  dollars  were  then  sent  back  to 
America  for  transmission  to  China.  Or  the  ship  might  be 
engaged  for  a  time  in  the  carrying  trade  between  the  Euro- 

1  David  A.  Wells,  speaking  of  the  monetary  system  of  Germany  be- 
fore 1873,  says  that  it  consisted  of  17  varieties  of  gold  money;  66  dif- 
ferent coins  of  silver,  possessing  full  legal-tender  powers  and  consti- 
tuting (1870)  65.7  per  cent  of  the  entire  circulation;  46  kinds  of  notes 
issued  by  35  different  banks,  besides  paper  money  of  various  kinds  to 
the  extent  of  7.5  per  cent  of  the  circulation.  Recent  Economic  Changes* 
p.  226. 

*  China  Review,  vol.  iii,  p.  2,  year  1874-75. 


3oi]     CURRENCY  CONDITIONS  IN  MODERN  CHINA         41 

pean  ports,  which  was  very  profitable  to  neutrals  during  the 
Napoleonic  wars,  until  she  had  accumulated  a  sufficient  sum 
in  Spanish  dollars  with  which  she  then  sailed  for  Canton. 
Tea  and  silk  were  shipped  back  in  exchange  for  these  coins.1 
In  another  place  the  same  author  says  that  during  these 
years  60  per  cent  of  the  total  value  of  the  trade  with  the 
United  States  was  in  Spanish  dollars,2 

"  Imitation  dollars  "  were  made  at  Canton  by  individuals 
with  permission  of  the  officials.  It  is  said  that  the  Provin- 
cial Treasurer  once  ordered  the  silversmiths  to  make  dollar 
pieces  "like  those  made  by  the  foreigners"  in  Ch'ien-lung's 
reign  (1735-1795)-  This  order  caused  trouble.  Profit  led 
the  silversmiths  to  use  more  alloy  until  they  got  to  mixing 
five  parts  of  alloy  with  eight  parts  silver.  The  result  was 
that  these  coins  soon  depreciated  in  the  market  and  subse- 
quently orders  were  issued  to  prohibit  private  coining.  But 
it  seems  that  the  order  was  not  effective.3 

There  were  various  other  things  which  tended  to  destroy 
popular  confidence  in  the  foreign  dollars  after  they  had 
gained  circulation  to  a  considerable  extent.  Many  coins 
were  debased  by  fraud.  For  instance,  it  is  said  that  these 
coins  were  filed  or  pared  all  around  the  edge  to  the  extent 
of  a  mace  or  so  each,  and  these  "  sweated  dollars  "  were 
mixed  with  the  sound  ones  which  would  then  pass  off  on  un- 
wary people;  and  that  sometimes  the  coiners  would  drill  a 
small  hole  in  the  edge  of  the  dollar  and  scoop  out  a  good 
deal  of  the  interior  silver,  replacing  it  with  lead  and  neatly 
soldering  a  bit  of  silver  over  the  hole.4  The  debasement  of 
the  sound  coins  and  the  circulation  of  "  imitation  dollars  " 

1  H.  B.  Morse,  op.  cit.,  p.  84. 
8  Ibid.,  p.  93- 

8  China  Review,  vol.  iii,  p.  8. 
4  Ibid.,  p.  4. 


42  THE  CURRENCY  PROBLEM  IN  CHINA  [302 

led  the  business  men  to  adopt  precautionary  measures ;  hence 
we  have  what  are  commonly  called  the  "  chopped  dolars  ". 

The  "  chopped  dollar "  resulted  from  over-precaution. 
The  merchant  into  whose  hands  the  foreign  coins  came, 
having  lost  his  confidence  in  them,  would  chop  them  with 
an  impressed  ideagram,  usually  about  one-eighth  of  an  inch 
square,  thereby  giving  them  his  guarantee  of  genuineness. 
When  this  was  repeated  by  each  succeeding  banker  the  coins 
became  defaced  and  resembled  a  sort  of  disc.  The  "chopped 
dollars  "  were  in  general  circulation  at  Canton. 

Attempts  to  coin  silver  dollars  seem  to  have  been  made 
in  other  places  by  local  authorities.  It  is  said  that  an  at- 
tempt was  made  to  coin  the  silver  tael  currency  at  Shanghai 
about  1856.  A  coinage  of  dollar  pieces  was  also  tried  in 
the  provinces  of  Fuchien  and  Formosa  about  1835  to  pay 
the  troops.  One  specimen  bears  an  inscription  stating  that  it 
was  "  pure  silver  for  current  use  from  the  Chang  Chau 
Commissariat;  [weight]  seven  mace,  two  candareens".  An- 
other specimen  is  of  the  same  weight  and  fineness  and  be- 
sides the  inscriptions  on  the  obverse  in  Chinese  and  in  Man- 
chu,  bears  on  the  reverse  "an  effigy  of  the  god  of  Longevity 
on  the  head  and  a  tripod  on  the  tail  to  authenticate  its  official 
origin."  1  These  coins  seem  never  to  have  gained  any  ex- 
tensive circulation,  and  coinage  by  a  government  mint  was 
not  undertaken  until  near  the  close  of  the  nineteenth  cen- 
tury. 

There  was  an  attempt  made  to  suppress  these  foreign 
coins  together  with  the  importation  of  opium  shortly  before 
the  Opium  War.  The  Provincial  Treasurer  sent  a  protest 
to  Peking  (1836)  against  such  an  action  and  declared  that 
the  coins  were  of  great  convenience  to  trade  and  unlike  the 
opium  were  producing  not  the  slightest  injury  to  China. 

1  Williams,  Middle  Kingdom,  vol.  ii,  p.  84. 


303]     CURRENCY  CONDITIONS  IN  MODERN  CHINA         43 

The  official  showed  that  the  coins  had  then  an  extensive  cir- 
culation in  the  four  coast  provinces  in  the  Southern  part  of 
China.1  After  the  war  all  the  different  kinds  of  foreign 
coins  were  declared  lawful  money  in  Canton. 

The  carolus  was  but  one  among  several  kinds  of  dollars 
that  were  then  in  circulation.  There  were  also  the  Peruvian, 
Bolivian,  Chilian  and  Mexican  dollars  and  the  rupee.  The 
South  American  dollars  had  been  driven  out  of  their  home 
countries  by  the  circulation  of  depreciated  paper  currencies, 
and  a  portion  found  their  way  to  China.  An  official  assay 
was  made  at  Canton  on  the  13th  of  July,  1842,  at  a  Spanish 
"  factory  "  and  the  different  dollars  were  found  to  possess 
the  following  relative  values : 


2 


To  pay  100  taels  of  fine  silver  in  Peruvian  dol- 
lars it  would  be  necessary  to  pay  by  weight. . . .  111.455  'tis. 

in  Mexican  dollars 111.900  " 

in  Bolivian  dollars  112.150  " 

in  Chilian  112.520  " 

in  rupees 109.790  " 

in  "  chopped  dollars  "  113.207  " 

Shanghai  was  made  an  open  port  by  the  Treaty  of  Nan- 
king, 1842.  It  soon  rose  to  be  the  centre  of  foreign  trade 
of  Central  China.  The  carolus  dollar  was  adopted  as  the 
money  of  account  in  this  trade  at  Shanghai.  There  was  a 
steady  importation  of  the  carolus  dollars  to  settle  the  bal- 
ance of  payment.  Mr.  Morse  states  that  in  the  year  1856 
the  import  of  treasure  to  settle  trade  balances  amounted  to 
$20,400,000;  for  the  next  year,  $17,500,000  in  silver.  To 
meet  this  demand  for  silver  the  supply  of  the  carolus  was 
insufficient  This  led  to  its  abandonment  as  the  money  of 
account  and  the  Shanghai  tael  was  adopted  instead  in  Janu- 
ary, 1857.3 

1  Chinese  Repository,  vol.  v,  p.  419,  1836. 
1  Ibid.,  vol.  xiv,  pp.  245-6,  1845. 
8  Morse,  op.  cit.,  pp.  467-8. 


902  \ 

(24.44 

900 

«« 

(24.30 

900 

H 

(24.2613 

900 

it 

(24.2604 

44  THE  CURRENCY  PROBLEM  IN  CHINA  [304 

The  coin  that  has  been  the  most  popular  in  recent  years 
is  the  Mexican  dollar.  Many  competitors  have  appeared  in 
the  market  but  none  have  succeeded  in  displacing  it  in  popu- 
lar favor.  The  American  trade  dollar  was  declared  lawful 
money  promptly  after  its  appearance;  but  most  of  these 
trade  dollars  went  to  the  melting  pot,  being  slightly  heavier 
than  the  Mexican  coin.  The  following  are  some  of  the 
principal  foreign  coins  and  their  relative  values : 

The  American  trade  dollar  27.215  grams  J  900  fine   (24.4935  grams  pure 

The  Mexican  dollar 27.072      " 

The  French  piaster 27.  " 

The  British  trade  dollar.  26.957      " 
The  Japanese  yen    26.956      " 

The  carolus  is  now  found  only  in  certain  localities  on  the 
lower  Yangtze  River.  In  these  places  it  has  obtained  a 
scarcity  value  and  is  very  much  overrated,  particularly  in 
Anhui  province  where  it  commands  a  value  sometimes  10 
per  cent  higher  than  the  Mexican.  In  most  places  all  these 
dollars  are  regarded  as  so  many  parts  of  the  silver  tael. 

IV.  Provincial  Silver  Coinage.  Silver  coinage  was  first 
undertaken  and  a  mint  established  for  it  in  1887  at  Canton, 
not  as  part  of  a  national  currency  system,  but  as  a  provin- 
cial undertaking  for  the  convenience  of  trade.  Before  the 
close  of  the  century  several  silver  mints  had  been  estab- 
lished in  the  provinces,  all  without  the  direct  control  of  the 
Board  of  Revenue  at  Peking.  The  designs  of  the  coins  were 
different,  and  the  quality  and  weight  of  silver  used  were  not 
uniform.  This  was  inevitable  inasmuch  as  the  Central  Gov- 
ernment did  not  exercise  any  supervision  over  the  mint  oper- 
ations. The  addition  of  these  provincial  dollars  to  the  cir- 
culation further  confused  the  currency  conditions.  More- 
over, the  silver  mints,  finding  that  there  was  a  popular 
demand  for  the  fractional  silver  coins,  issued  an  enormous 

1  A  gram  =  15.432  grains. 


305]     CURRENCY  CONDITIONS  IN  MODERN  CHINA  45 

amount  of  these  minor  pieces,  greatly  out  of  proportion  to 
the  output  of  the  dollar  pieces.1  The  mint  at  Foochow 
minted  nothing  but  minor  silver  coins  on  account  of  the 
seigniorage  profits.  The  result  was  that  the  fractional  silver 
coins  depreciated  in  terms  of  the  dollar  unit  and  have  since 
been  fluctuating  in  the  local  markets  and  circulating  without 
reference  to  the  standard  coin. 

The  founder  of  the  silver  mint  at  Canton  was  Ching 
Chih-tung,  then  the  Viceroy  of  the  Provinces  of  Kuangtung 
and  Kuanghsi.  The  circumstances  that  led  to  the  estab- 
lishment of  this  mint  were  as  follows : 

Since  the  close  of  the  Taiping  Rebellion  the  cash  cur- 
rency conditions  had  been  very  unsatisfactory,  because  of 
the  general  stoppage  of  cash  coinage.  The  revival  of  in- 
dustries in  the  provinces  increased  the  demand  for  the  cash 
currency.  In  Peking  the  io-cash  pieces  had  depreciated  to 
about  2-cash  in  value  and  caused  frequent  price  disturb- 
ances. Moreover  the  depreciation  of  silver  after  1873  en- 
hanced the  silver  value  of  the  cash.  Debased  counterfeit 
coins  appeared  in  large  numbers  and  there  was  a  gradual 
disappearance  of  the  coins  of  better  quality  everywhere. 
These  conditions  led  the  Empress  Dowager  to  issue  an  edict 
in  1887,  commanding,  in  response  to  a  memorial  of  the 
Board  of  Revenue,  that  "  all  provinces  along  the  Yangtze 
and  the  seaboard  be  required  to  convert  a  portion  of  their 
remittances  to  Peking  into  cash  and  send  this  cash  to  Tient- 
sin, there  to  be  stored  up  in  readiness  for  use  in  Peking; 
also  that  the  provinces  which  were  required  by  law  to  manu- 
facture cash  should  one  and  all  be  called  upon  to  commence 
operations  without  delay  with  a  view  to  a  gradual  restora- 
tion to  the  old  basis.2     The  edict  seems  to  have  been  dis- 

1  The  total  issue  of  dollars  was  estimated  at  40,000,000,  while  the 
number  of  fractional  silver  pieces  was  1,400,000,000,  according  to  a 
Government  statement  made  in  1910. 

a  Emperor  Kuang  Hsu,  State  Papers,  year  13,  p.  1. 


46  THE  CURRENCY  PROBLEM  IN  CHINA  [306 

regarded  by  the  officials.  The  complaint  was  that  coining" 
was  too  expensive,  which  probably  was  true.  But  the 
Empress  was  determined  that  something  should  be  done  to 
improve  the  currency  conditions  and  these  officials  suf- 
fered degradation.  By  a  subsequent  edict  the  depreciated 
10-cash  currency  in  Peking  was  given  a  fixed  legal  value 
based  upon  the  market  value  in  1887 :  namely,  2  cash  for 
each  10-cash  piece. 

Chang  Chih-tung,  after  this  edict  had  been  issued,  deter- 
mined to  take  steps  to  establish  a  silver-coinage  system. 
In  April,  1887,  he  requested  the  Chinese  Minister  at 
London  to  purchase  for  him  some  coining  machinery.  Ac- 
cordingly a  contract  was  entered  into  with  Messrs.  Ralph 
Heaton  and  Sons  of  Birmingham  for  the  supply  of  a  com- 
plete plant  of  coining  machinery  with  all  modern  improve- 
ments for  the  production  of  silver  and  copper  coins.1  In 
July  Chang  Chih-tung  memorialized  the  Empress  suggest- 
ing the  introduction  of  a  national  silver  coinage,  beginning 
the  first  experiment  at  Canton.  Part  of  this  memorial  runs 
as  follows : 

The  Povince  of  Kuangtung  is  the  mart  of  Chinese  trade  with 
Europe,  and  the  foreign  dollar  is  the  circulating  medium  not 
only  there,  but  in  Kuanghsi,  Fuchien,  Formosa,  Shantung, 
Chihli,  several  of  the  interior  Provinces,  and  the  North  Eastern 
frontier.  Wherever  there  is  an  open  port,  the  Mexican  dollar 
is  taken  as  the  common  currency.  In  this  way  the  advantages 
to  our  Government  of  having  a  national  currency  of  our  own 
are  lost,  while  they  are  being  reaped  by  other  countries.  The 
principles  governing  the  coinage  of  cash  and  of  silver  are  the 
same — that  is,  they  should  both  be  made  at  our  own  mints  and 
by  our  own  methods,  in  order  that  we  may  maintain  our 
national  standing.  In  the  Province  of  Kuangtung  a  system  of 
our  own  coinage  is  especially  necessary,  as  the  currency  there 

1  Annual  Report  of  the  Dir.  of  the  Mint,  U.S.,  1887. 


307]     CURRENCY  CONDITIONS  IN  MODERN  CHINA         47 

consists  principally  of  old  and  mutilated  dollars  and  broken 
pieces  of  silver,  the  use  of  which  is  a  source  of  much  loss  to 
all  concerned.1 

Chang  stated  that  he  had  already  given  orders  for  some 
coinage  machinery  for  the  minting  of  silver  dollars  and  pro- 
posed the  employment  of  a  skilled  foreign  metallurgist 
to  begin  coining  silver  pieces  in  connection  with  the 
cash  coinage.  As  to  the  weight  of  the  coinage  unit, 
he  proposed  a  coin  slightly  heavier  than  the  Mexi- 
can dollar  in  order  to  make  its  introduction  easy. 
The  coins  thus  issued  should  be  receivable  in  the  pay- 
ment of  public  dues.  He  suggested  that  $1,000,000 
in  silver  should  be  struck  off  at  once  as  the  first  experiment 
and  if  these  coins  were  received  favorably  $5,000,000  in  all 
should  be  coined  at  Canton.  If  the  experiment  should 
prove  a  success  he  then  would  advise  that  the  Board  of 
Revenue  establish  a  central  mint  at  Tientsin  to  coin  the 
national  dollars.  He  estimated  that  if  $10,000,000  per 
annum  were  struck  the  country  would  soon  be  supplied  with 
the  new  currency  which  would  be  highly  beneficial  to  China. 

This  memorial  was  referred  to  the  Board  of  Revenue  and 
nothing  more  was  heard  about  it.  The  prospect  of  an  early 
establishment  of  a  national  coinage  was  thus  lost  sight  of. 
But  Chang  Chih-tung  managed  to  secure  sanction  for  his 
Canton  mint.  Thus  the  first  provincial  silver  mint  in 
China  came  into  being. 

This  mint  commenced  operations  in  the  summer  of  1890. 
The  whole  establishment  cost  $1,000,000.  The  standard 
coin  was  fixed  at  72  tael-cents  in  weight  (Treasury  tael) 
900  fine.  The  fractional  coins  were  of  four  denominations, 
namely,  50-cent,  20-cent,  10-cent,  and  5-cent  pieces.  The 
50-cent  piece  was  860  fine,  the  20-  and  10-cent  pieces,  820 

1  U.  S.  Mint  Report,  1887,  P-  335- 


48  THE  CURRENCY  PROBLEM  IN  CHINA  [308 

fine,  and  the  5-cent  piece,  800  fine.  One-cent  copper  pieces 
were  also  minted.  Counting  in  terms  of  the  new  silver 
dollars,  about  three  million  dollars  worth  of  coins  were 
issued  during  the  first  year;  but  only  a  fractional  part  of 
the  total  value  was  in  dollar  pieces.  An  analysis  of  the 
available  statistics  showing  the  outputs  of  the  mint l  (the 
first  nine  years)  gives  the  following  facts :  Out  of  a  total 
of  52,310,760.15  Canton  silver  dollars  in  value  only  about 
3,000,000  dollars  were  in  dollar  pieces,  the  fractional  pieces, 
mostly  20-  and  10-cent  coins,  constituting  nearly  95  per 
cent  of  the  total  output.  This  issue  of  a  disproportionately 
large  number  of  minor  coins  can  be  explained  by  an  inves- 
tigation of  the  demand  for  currency. 

There  seems  to  have  been  a  natural  demand  for  these 
minor  coins.  The  cash  is  very  insignificant  in  value.  The 
silver  tael  unit  and  its  decimal  parts  are  not  coined  and  the 
use  of  the  bullion  is  attended  with  great  inconvenience, 
while  the  dollar,  judging  from  economic  conditions,  is  al- 
together too  large  for  ordinary  use.  No  smaller  coins  that 
the  dollar  had  previously  been  found  in  circulation.  The 
British  colony  of  Hong  Kong  had  seized  the  opportunity  to 
strike  minor  coins,  and  out  of  the  colony's  revenue  of 
ij557>3°°  dollars  in  1888,  72,000  dollars  was  the  profit 
on  the  small  silver  coinage  on  an  issue  of  910,000 
dollars  worth  of  silver.8  These  coins  even  commanded 
a  premium  in  cash  as  high  as  20  per  cent.  It  stands 
to  reason  that  the  provincial  authorities  would  seize  the 
opportunity  to  increase  the  output  of  these  fractional  silver 
coins,  considering  the  fact  that  there  was  considerable  coin- 
age profit.  No  limitations  were  put  on  the  legal-tender 
quality  of  these  subsidiary  coins,  such  a  conception  being  a 
totally  foreign  one. 

1  U.  S.  Mint  Report,  1890,  p.  275.     All  these  sums  are  expressed  in 
silver  dollars  of  the  new  Canton  standard. 

2  U.  S.  Mint  Report,  1890,  p.  275. 


309]     CURRENCY  CONDITIONS  IN  MODERN  CHINA  49 

In  1895  the  Wuchang  silver  mint  was  established  by 
Chang  Chih-tung  who  had  been  transferred  to  the  Vice- 
royalty  of  the  Provinces  of  Hupei  and  Hunan.  An  effort 
was  made  to  determine  a  fixed  ratio  of  exchange  between  the 
new  silver  dollar  and  the  cash.  In  1896  the  viceroy  issued 
a  proclamation  to  the  effect  that  the  new  Hupei  dollar  was 
officially  given  a  cash  value  at  the  rate  of  one  silver  coin  to 
1000  cash.  It  was  soon  found  out  that  a  mere  proclamation 
could  not  fix  the  exchange  between  the  two  currencies  and 
the  order  became  a  dead  letter. 

The  Peiyang  mint  was  established  in  1896.  The  ques- 
tion as  to  whether  the  tael  or  the  dollar  should  be  taken  as 
the  unit  came  up  for  consideration.  It  was  considered  that 
the  tael  would  be  impracticable.  The  Foochow  mint  was 
established  in  the  same  year.  It  coined  nothing  but  10-  and 
20-cent  pieces  during  the  10  years  of  its  existence.  The 
amount  annually  issued  was  not  regular:  about  3,000,000 
pieces  in  1896;  2,500,000  in  1897;  and  in  1898  about 
6,500,000  pieces. 

It  is  not  necessary  to  go  into  the  details  of  the  circum- 
stances attending  the  establishment  of  the  other  mints.  It 
is  sufficient  to  point  out  the  fact  that  with  the  exception  of 
the  Canton  mint  these  mints  were  all  established  during  the 
period  of  reform  agitation  after  the  war  with  Japan.  By 
the  end  of  the  year  1898  there  had  been  established  no 
fewer  than  10  provincial  mints.  Given  in  the  order  of 
their  date  of  establishment  they  are  as  follows : 

Canton  Mint  (operation  began)   1890 

Wuchang  Mint   1895 

Tientsin  1896 

Foochow   1896 

Nanking    1898 

Hangchow  (about  completed)   1898 

Nganking    1898 

Mukden 1898 

Kirin    1898 

Chentu  (projected) 1898 


50  THE  CURRENCY  PROBLEM  IN  CHINA  [<$IO 

The  provincial  dollars  never  quite  succeeded  in  displac- 
ing the  Mexican  and  other  foreign  dollars.  As  we  have  al- 
ready mentioned,  the  silver  mints  soon  after  their  establish- 
ment devoted  their  energy  to  the  coinage  of  fractional  silver 
coins  with  the  result  that  the  latter  depreciated.  A  dollar 
commands  a  price  in  these  subsidiary  coins  ranging  from  10 
to  12  dimes. 

The  circulation  of  these  coins  both  of  foreign  and  of 
provincial  mintage  from  the  point  of  view  of  convenience 
of  trade  has  been  beneficial.  But  these  coins  have  been  in 
the  nature  of  an  "  addition "  to  the  earlier  cash  and  un- 
coined silver  currency.  The  double-standard  metallic  cir- 
culation described  above  remains  essentially  the  same  today 
as  it  was  before  the  reform  with  some  new  "  additions  " 
which  will  be  treated  in  the  subsequent  chapter. 

Aside  from  the  metallic  circulation  there  is  a  consider- 
able note  currency  issued  by  the  banks  and  money  changers 
current  in  local  markets.  Of  this  paper  currency,  a  part  is 
notes  based  on  the  cash.  Such  cash  notes  form  a  consider- 
able portion  of  the  ordinary  currency.  They  circulate  inde- 
pendently of  government  guarantee  and  almost  any  con- 
cern can  issue  them  if  it  so  desires.  The  notes  are  rarely 
current  outside  the  district  where  the  credit  of  the  issuer  is 
known  to  be  beyond  question.  There  is  also  an  increasing 
amount  of  silver  notes  based  on  the  tael  or  the  dollar.  Those 
notes  issued  by  the  foreign  banks,  particularly  by  the  Hang- 
kong  and  Shanghai  Bank,  circulate  extensively  in  the  ad- 
vanced commercial  centres. 

To  conclude:  It  can  be  seen  from  the  above  description 
of  the  currency  conditions  that  even  at  present  China  has 
no  uniform  system.  Economists  attribute  to  money  two 
distinct  characteristic  functions.  They  call  it  a  medium  of 
exchange,  for  it  is  by  the  use  of  money  that  exchanges  are 
made  in  a  civilized  country.  They  also  call  it  a  measure  or 
standard  of  value,  by  which  they  mean  simply  that  it  is  the 


31 1  ]     CURRENCY  CONDITIONS  IN  MODERN  CHINA  5I 

standard  of  prices.  No  one  single  unit  of  currency  in  the 
Chinese  system,  if  so  it  may  be  called,  performs  the  latter 
function  for  the  country  as  a  whole.  The  present  condi- 
tions are  the  result  of  the  laisser-faire  policy.  From  the 
point  of  view  of  public  welfare  nothing  seems  to  be  so 
urgent  as  to  reduce  this  tangle  of  systems  with  its  shifting 
double-standard  currency  to  a  single  system  with  one  definite 
standard  of  value.  A  system  of  coins  consisting  of  denom- 
inations adjusted  to  serve  the  convenience  of  trade,  but  all 
standing  in  a  fixed  relation  to  the  unit  of  value,  would  se- 
cure the  following  advantages  of  which  the  present  con- 
fusion deprives  the  public: 

It  would  stimulate  commerce  and  encourage  internal 
trade  development  by  enabling  the  business  men  to  trade 
with  the  most  distant  parts  of  the  country  on  a  fixed  basis 
of  value. 

It  would  greatly  stimulate  foreign  commerce,  which  has 
been  seriously  hampered  by  the  uncertainty  and  lack  of 
uniformity  in  the  currency  used. 

The  greatest  benefit,  however,  would  result  from  remov- 
ing the  inconveniences  and  the  confusion  of  the  existing 
state  of  affairs.  For  monetary  reform  would  substitute  one 
system  in  place  of  many,  thus  making  it  no  longer  neces- 
sary to  convert  one  kind  of  currency  into  another,  each  of 
which  stands  in  no  definite  ratio  to  the  other  but  fluctuates 
in  the  market  just  as  the  law  of  supply  and  demand  dictates 
or  the  speculators  wish  to  make  it.  It  would  relieve  the 
business  men  and  others  of  the  necessity  of  weighing  and 
testing  and  calculating,  which  the  uncoined  silver  currency 
now  makes  unavoidable. 

Considering  China's  exceedingly  loose  political  structure, 
the  enormous  extent  of  the  country,  and  the  widely  diver- 
gent local  economic  conditions,  to  introduce  a  modern  sys- 
tem is  no  small  task.  In  the  following  chapters  we  shall 
study  the  various  attempts  at  reform  which  have  been  made 
since  the  Japanese  War  in  1895. 


CHAPTER  IV 
Currency  Reform 

The  modern  reform  movement  began  after  the  war  with 
Japan  in  1895.  Led  by  a  small  group  of  energetic  reform- 
ers who  were  readily  listened  to  by  the  Emperor  Kuang 
Hsu,  the  Government  projected  many  comprehensive  and 
radical  reform  measures  for  the  modernization  of  the  coun- 
try. The  movement  for  reform  was  rudely  interrupted  by 
the  coup  d'Etat  of  1898  and  a  reaction  came  with  the  return 
of  the  rule  of  the  Empress  Dowager. 

Among  the  reform  proposals  are  found  many  sugges- 
tions advocating  the  introduction  of  a  national  currency  sys- 
tem. All  these  currency  suggestions  are  characterized  by  a 
lack  of  knowledge  of  monetary  principles  and  of  the  actual 
conditions  and  needs  of  the  country.  The  suggestions  are 
in  the  nature  of  broad  generalizations  and  are  almost  com- 
pletely lacking  in  practical  details.  A  few  of  them  may  be 
noticed  in  passing. 

Hu  Chu-fen,  then  mayor  of  Peking,  was  among  the  first 
to  advocate  currency  reform.  In  a  memorial l  submitted  in 
1895  he  suggested  many  urgent  reforms,  among  which  the 
reform  of  the  currency  was  included.  He  urged  the  intro- 
duction of  a  uniform  coinage  system  in  three  metals — gold, 
silver  and  copper — and  the  establishment  of  a  bank  of  issue 
under  the  control  of  the  Board  of  Revenue  which  was  to 
have  branch  banks  in  the  Provinces. 

1  Emperor  Kuang  Hsu's  State  Papers,  year  21,  p.  IJ. 
52  [312 


313]  CURRENCY  REFORM  53 

Wang  Peng-yun,  a  censor,  made  a  proposal  for  imme- 
diate silver  coinage  to  relieve  the  market  stringency  caused 
by  the  scarcity  of  the  copper  cash.1  The  question  of  es- 
tablishing a  central  silver  mint  was  taken  under  considera- 
tion. All  the  provincial  silver  mints,  with  the  exception  of 
the  Canton  mint,  were  established  at  this  time. 

Sheng  Hsuan-huai,  then  a  junior  secretary  in  the  Tsung- 
li  yamen,  submitted  a  comprehensive  reform  program  in 
1896,  which  for  the  time  aroused  great  interest.  As  to  the 
question  of  national  currency,  he  advocated  the  adoption  of 
a  coinage  system  based  on  the  Chingping  tael,  900  fine.  He 
suggested  that  the  central  mint  be  established  at  Peking  with 
four  branch  mints  at  Canton,  Hupei,  Shanghai  and  Tien- 
tsin. Taxes  were  to  be  made  payable  in  the  national  coin 
and  the  use  of  bullion  as  currency  was  to  be  prohibited. 
Gold  coins  and  fractional  silver  coins  were  also  to  be  struck, 
He  proposed  the  establishment  of  a  bank  for  international 
commerce  with  a  capital  of  5,000,000  taels  to  be  subscribed 
entirely  by  Chinese  merchants.  Of  the  total  capital  stock 
Sheng  pledged  the  shareholders  of  the  China  Merchants' 
Steamship  Co.  to  subscribe  1,000,000  taels.  The  bank  was 
to  be  situated  at  Shanghai  and  to  be  known  as  the  Imperial 
Chinese  Bank  of  International  Commerce.  The  imperial 
sanction  was  granted  February  26,  1897,  to  Sheng  and  he 
was  given  authority,  as  soon  as  the  bank  had  been  estab- 
lished, to  strike  100,000  coins  based  on  the  tael  in  accord- 
ance with  his  proposal.  These  coins  were  to  be  put  into  cir- 
culation as  an  experiment  with  the  expectation  that  if  the 
experiment  should  prove  successful  the  coinage  might  be 
extended  throughout  the  land.  The  powers  and  privileges 
conferred  upon  the  bank  were  very  comprehensive,  includ- 
ing the  right  to  coin  money,  issue  notes,  handle  all  govern- 

1  Emperor  Kuang  Hsu's  State  Papers,  year  21,  pp.  33-34. 


54       THE  CURRENCY  PROBLEM  IN  CHINA  [3^ 

ment  funds  and  establish  branch  banks  in  the  provincial 
capitals,  the  open  ports  and  in  Europe  and  America.1 

Early  in  1897  on  account  of  the  marked  depreciation  of  the 
gold  price  of  silver  and  the  embarrassments  of  the  Govern- 
ment in  providing  for  the  payment  of  interest  and  redemp- 
tion of  the  gold  loans,  made  to  pay  off  the  Japanese  war 
indemnity,  coinage  on  the  gold  basis  found  its  advocate  in 
Yang  Yi-chih,  a  junior  secretary  in  one  of  the  Boards.  Yang- 
advocated  the  introduction  of  the  English  system  of  pounds 
and  shillings  with  the  gold  pound  as  the  standard  coin.  To 
keep  gold  within  the  country  for  currency  purposes  he  sug- 
gested that  the  exportation  of  gold  through  the  port  of 
Shanghai  be  prohibited.2 

With  the  exception  of  Sheng  Hsuan-huai's  banking  pro- 
ject, none  of  the  currency  suggestions  materialized  into  de- 
finite policies.  The  problem  of  currency  reform  was  not 
especially  looked  into.  Nor  was  this  unnatural.  It  was  but 
one  of  the  many  questions  that  were  then  claiming  the  at- 
tention of  the  Government,  and  it  was  relatively  unim- 
portant compared  with  the  political  and  fiscal  problems  of 
the  time. 

The  reform  movement  started  again  after  the  disasters 
of  1900.  In  July,  1901,  the  two  Viceroys,  Liu  K'un-yi  and 
Chang  Chih-tung,  in  the  third  of  their  famous  joint  me- 
morials 3  urging  immediate  reforms  in  the  political  and 
educational  systems  of  the  country  and  in  the  methods  of 
government,  took  up  the  subject  of  currency  reform  and 
advocated  the  establishment  of  a  national  coinage  based  on 
the  dollar  unit.  An  edict  was  issued  on  the  26th  of  August, 
1 90 1,  which  was  the  first  effective  step  in  the  attempt  to 
improve  the  currency  conditions  of  the  country. 

1  Emperor  Kuang  Hsu's  State  Papers,  year  22,  pp.  31-33. 

1  Ibid.,  year  23,  p.  23.  8  Ibid.,  year  27,  p.  51. 


315]  CURRENCY  REFORM  55 

The  edict  ordered  the  closing  of  the  provincial  mints, 
except  those  at  Canton  and  Wuchang,  and  legalized  the 
circulation  of  the  coins  issued  by  the  two  latter  on  account 
of  their  uniform  weight  and  fineness.  Officials  of  the  other 
Provinces  desirous  of  obtaining  silver  dollars  were  directed 
to  send  pure  silver  ingots  to  either  of  these  two  mints  for 
coinage.  The  closing  of  the  local  mints  was  intended  to 
prevent  variations  in  the  coinage.  The  edict  declared, 
furthermore,  that  70  per  cent  of  the  tributes  and  taxes  were 
thenceforth  to  be  payable  in  silver  sycee  (fine  silver),  and 
30  per  cent  in  silver  dollars,  issued  by  these  mints,  at  the 
rate  of  72  tael-cents  to  the  dollar.  The  Viceroys  of  Kuang- 
tung  and  Hupei  were  commanded  to  issue  strict  regulations 
to  the  mint  officers  to  give  great  care  to  the  minting  pro- 
cesses in  order  to  preserve  strict  uniformity  in  the  weight 
and  fineness  of  the  coins.  Should  irregularity  occur  the 
officers  in  charge  were  to  be  punished,  and  rewards  were  to 
be  given  to  those  whose  work  was  successful.  The  mint 
officers  were  further  required  to  render  quarterly  reports  of 
the  mint  operations  to  the  Board  of  Revenue. 

The  edict  was  well-intentioned.  It  was  an  attempt  to  cor- 
rect the  evil  of  varying  weight  and  fineness  in  the  issues  of 
the  different  provincial  mints,  which  was  the  chief  complaint 
of  the  time  against  the  silver  coinage.  But  the  remedy  ap- 
plied was  hardly  a  satisfactory  one.  The  enormous  extent 
of  the  territory  and  the  absence  of  modern  means  of  trans- 
portation necessitated  the  establishment  of  several  mints, 
and  the  proper  way  to  secure  uniformity  was  to  establish 
uniform  methods  of  operation  and  control  over  the  mints 
by  the  Central  Government  rather  than  to  close  all  but  two. 
As  a  matter  of  fact,  however,  the  edict  was  not  taken  ser- 
iously and  the  provincial  mints  continued  their  activities. 
Because  of  the  absence  of  uniform  regulations,  and  espec- 
ially because  of  the  careless  and  crude  assaying,  uniformity 


56       THE  CURRENCY  PROBLEM  IN  CHINA  [3^ 

of  weight  and  fineness  in  the  silver  coinage  was  out  of  the 
question. 

To  supply  the  insufficiency  of  cash  in  the  Provinces,  an- 
other edict,  dated  February  2,  1902,  authorized  the  Prov- 
inces along  the  Yangtze  River  and  seaboard  to  coin  the  new 
copper  yuan,  of  which  a  small  quantity  had  been  recently 
struck  at  the  provincial  mint  of  Kiangsu.  The  new  copper 
yuan  coinage  differs  from  the  old  cash  in  that  it  has  not  the 
square  hole  and  is  struck  by  modern  coinage  presses.  The 
success  of  the  new  coinage  was  very  rapid  and  an  enormous 
amount  was  put  into  circulation  within  a  few  years.  This 
issue  yielded  a  considerable  profit  to  the  provincial  govern- 
ment; but  caused  many  hardships  to  the  public  on  account 
of  depreciation.  The  consequences  of  the  new  copper 
coinage  will  be  discussed  later.  For  the  present,  it  is  suffi- 
cient to  note  how  the  weakness  of  the  political  system,  its 
decentralized  and  incoherent  character,  hampered  efforts  at 
monetary  reform. 

A  series  of  international  engagements  gave  added  em- 
phasis to  the  urgency  of  the  reform  of  the  currency.  Ar- 
ticle II  of  the  treaty  of  commerce  and  navigation  entered 
into  with  Great  Britain,  September  5,  1902,  provides  that 
"  China  agrees  to  take  the  necessary  steps  to  provide  for  a 
uniform  national  coinage  which  shall  be  legal  tender  in  pay- 
ment of  all  duties,  taxes,  and  other  obligations  throughout 
the  Empire  by  British  as  well  as  Chinese  subjects."  1  In  the 
treaty  of  commerce  between  China  and  the  United  States, 
signed  October  8,  1902,  China  made  a  similar  pledge.2  Cur- 
rency reform  was  thus  made  a  matter  of  international  ob- 
ligation. 

A  new  factor  meanwhile  made  its  influence  felt  and  for 

1  Emperor  Kuang  Hsu's  State  Papers,  year  28,  p.  25. 
'Ibid.,  year  29,  p.  30,  art.  13. 


3 1 7]  CURRENCY  REFORM  57 

some  time  completely  paralyzed  the  power  of  the  Govern- 
ment. The  steady  fall  in  the  gold  price  of  silver  became  so 
serious  in  1902-3  that  it  precipitated  a  financial  crisis,  and 
the  Government  on  account  of  its  foreign  gold  obligations 
was  threatened  with  bankruptcy.  In  order  to  understand 
the  situation  aright,  we  must  now  direct  our  attention  to  its 
fiscal  and  international  aspects. 

The  foreign  indebtedness  of  the  Government  arose  almost 
entirely  out  of  two  international  engagements  made  in  1894 
and  1900.  The  war  indemnity  to  be  paid  to  Japan  according 
to  the  treaty  of  peace  made  in  1895  was  200.000.000  K'up'- 
ing  or  treasury  taels.  To  this  was  added  30,000.000  taels 
as  compensation  for  the  retrocession  of  the  Kuantung 
peninsula,  making  a  total  of  230,000,000  KP.  taels.  By  a 
special  agreement  between  the  two  Governments  this  sum 
was  computed  in  English  money  and  the  payments  were 
made  in  gold  at  London.  By  the  7th  of  May,  1898,  the 
entire  indemnity  was  paid  off,  the  payments,  including  1,- 
500.000  taels  for  expenses  of  the  occupation  of  Wei-hai-wei. 
amounting  to  £38.082.884.  With  this  supply  of  gold, 
Count  Matsukata  was  enabled  to  introduce  the  gold  standard 
into  Japan  in  1 897-8.  * 

To  meet  the  increased  expenditure  during  the  war,  and 
to  pay  off  the  indemnity  at  its  conclusion,  there  were  two 
conceivable  methods  of  getting  additional  funds,  namely, 
increased  taxation  or  borrowing.  Increased  taxation,  for 
reasons  which  will  be  presently  given,  was  not  possible.  The 
Government  commanded  no  credit  at  home,  hence  foreign 
loans  were  resorted  to.  Four  separate  loans,  amounting  to 
£6,635,000,  had  already  been  contracted  in  1894  and  early 
in  1895,  and  the  proceeds  had  all  been  spent  in  one  way  or 
another.    Three  much  larger  loans  had  to  be  raised  in  1895- 

1  Report  on  the  Adoption  of  the  Gold  Standard  in  Japan  by  Count 
Matsukata,  p.  173. 


58       THE  CURRENCY  PROBLEM  IN  CHINA  [3^ 

1898  to  pay  off  the  indemnity.  The  terms  were  very  easy, 
largely  because  of  the  jealousy  of  the  rival  groups  of  Euro- 
pean powers  with  which  the  loans  were  made.  These  loans 
are  as  follows: 

Franco-Russian  Loan (1895)     4%        £15,820,000  (400,000,000  fcs.) 

Anglo-German  Loan (1895)     5%  16,000,000 

Anglo-German  Loan (1898)     4lA%      16,000,000 

To  this  gold  debt  was  added  what  is  generally  known  as 
the  Boxer  indemnity  which  was  fixed  according  to  the  final 
Protocol  of  September  7,  1901,  at  450,000,000  taels.  This 
new  indemnity  was  made  a  debt,  payable  in  39  years,  bear- 
ing interest  at  4  per  cent.  Reckoned  at  the  rate  of  exchange 
of  the  time,  the  indemnity  was  put  at  £67,500,000  in  gold.1 

It  remains  to  be  seen  what  were  the  resources  of  the  Gov- 
ernment to  meet  the  new  obligations  thus  incurred.  The 
annual  charge  including  interest  and  redemption  on  the  loans 
amounted  to  (about)  £3,000,000.  The  annual  indemnity 
charges  raised  the  total  to  over  £6,000,000,  equivalent  to 
(about)  40,000,000  KP.  taels.  The  total  revenue  of  the 
Government  in  1901  was  put  at  88,200,000  taels  approxi- 
mately.2 

A  detailed  treatment  of  the  fiscal  system  and  methods 
does  not  fall  within  the  scope  of  this  study.  But  a  general 
outline  will  help  toward  understanding  the  monetary  situa- 
tion. 

The  principal  sources  of  revenue  are  the  land  tax,  the 
maritime  customs,  the  leekin,  the  regular  customs,  and  the 
salt  gabelle.  The  land  tax,  consisting  of  a  tax  in  money 
and  a  tax  in  grain,  is  a  consolidation  of  the  land  tax  and 
the  poll  tax  and  has  been  for  centuries  the  principal  support 

1  At  the  rate  of  3s.  to  the  tael,  the  total,  including  interest,  will  amount 
to  982,238,150  taels. 
1  Statesmen's  Yearbook,  1903. 


319]  CURRENCY  REFORM  59 

of  the  Government.  Theoretically,  the  tax  levied  to-day  is 
according  to  the  rate  fixed  in  171 3,  exactly  200  years  ago, 
when  by  an  edict  it  was  fixed  for  all  time  at  the  rate  paid 
that  year.  As  it  is  actually  levied  the  rate  is  not  at  all  uni- 
formly adjusted  to  the  quality  and  value  of  the  land  in  dif- 
ferent parts  of  the  country.  The  lapses  of  time  and  absence 
of  uniform  regulations  account  for  this.  The  confusion 
in  the  currency  also  works  great  injustice  to  the  taxpayers 
and  is  one  of  the  worst  causes  of  official  corruption.  A 
word  of  explanation  will  make  this  point  clear. 

It  has  been  pointed  out  before  that  none  of  the  units  of 
currency  answer  the  description  of  a  national  monetary 
standard,  that  the  cash  and  the  tael  are  two  independent 
units,  and  that  the  former  is  not  a  subsidiary  division  of 
the  latter  which  is  uncoined.  The  notes  issued  by  the  banks 
and  money  changers  are  of  two  kinds,  silver  notes  and  cash 
notes.  The  value  of  silver  in  cash  or  vice  versa  depends 
upon  the  supply  and  demand  in  the  local  market.  The  money 
taxes  are  partly  collected  in  silver  and  partly,  almost  wholly 
in  the  case  of  the  interior  provinces,  in  cash.  The  trans- 
actions of  the  masses  of  the  people  are  in  cash.  But  the 
taxes  are  remitted  to  the  Treasury  in  silver  and  the  Treas- 
ury transactions  are  in  silver.  When  the  money  is  collected 
and  remitted  in  different  currencies  trouble  from  the  fluctua- 
tions in  the  rate  of  exchange  is  unavoidable.  In  actual 
practice  the  tax-collectors  reckon  on  a  surplus  to  make  up 
any  possible  depreciation  in  the  event  of  a  falling  exchange. 
This  practice  has  the  sanction  of  custom  and  official  exac- 
tions in  one  form  or  another  are  usually  made  under  this 
pretext.  When  the  taxes  are  collected  in  silver,  there  is  the 
chance  of  manipulating  the  adjustment  of  the  local  to  the 
official  rate  of  exchange  and  of  exacting  money  for  alleged 
difference  of  weight  and  fineness  in  the  silver.  The  currency 
confusion  affects  all  the  taxes  and  it  must  be  admitted  that 


60  THE  CURRENCY  PROBLEM  IN  CHINA  [320 

no  fiscal  reform  can  be  carried  out  satisfactorily  without 
taking  this  monetary  aspect  of  the  problem  into  considera- 
tion. 

The  maritime  customs  are  the  only  revenue  that  is  levied 
at  a  uniform  rate  and  of  which  the  amounts  collected  are 
accurately  reported.  The  duty  is  5  per  cent  ad  valorem  on 
both  imports  and  exports.  The  tariff  duties  are  arranged 
according  to  commercial  treaties,  and  therefore  the  Govern- 
ment is  not  at  liberty  to  raise  them. 

The  "  regular  "  customs  levied  on  native  shipping,  etc., 
yield  only  a  trifling  amount;  but  it  is  generally  admitted 
that  only  a  small  fraction  of  the  revenues  collected  is  re- 
ported. Mr.  E.  T.  Williams  x  gives  a  good  example  from 
Tientsin.  The  regular  customs  at  Tientsin  remitted  to  Pe- 
king, in  1900,  were  70,000  taels;  but  after  the  station  was 
taken  under  the  supervision  of  the  maritime  customs  this 
amount  grew  to  no  less  than  1,195,015  taels  in  1906. 

The  leekin,  as  the  term  denotes,  was  originally  a  duty  of 
one  per  mille  ad  valorem  collected  in  transit  on  articles  of 
merchandise.  It  was  a  war  measure  first  imposed  by  Lei 
Yi-ch'eng,  the  salt  Tao-tai  of  the  lower  Huai  River  district, 
as  a  temporary  expedient  in  the  time  of  the  Taiping  Rebel- 
lion to  supply  the  demands  of  the  army.  But  it  was  retained 
and  extended  after  the  Civil  War.  There  is  no  uniformity 
in  this  levy,  except  that  it  is  many  times  one  per  mille.  The 
levy  oftentimes  is  a  bargain  between  the  collector  and  the 
payer.  Corruption  is  prevalent  and  trade  has  been  greatly 
hindered  by  this  duty.  Condemnatory  edicts  and  memor- 
ials concerning  it  have  been  numerous  in  recent  years  and 
the  Government  has  declared  its  intention  of  abolishing  this 
imposition. 

Salt  was  made  a  government  monopoly  as  early  as  the 

1  Quarterly  Journal  of  Economics,  vol.  xxvi,  p.  912,  no.  3 ;  pp.  482- 
510,  "  Taxation  in  China." 


321]  CURRENCY  REFORM  6l 

seventh  century  B.  C.  by  Kuan-tze  in  the  dukedom  of  Ch'i 
(Shantung).  The  Government  to-day  exercises  strict 
control  of  the  manufacture,  transport,  and  sale  of  salt, 
and  for  the  administration  of  the  salt  gabelle  the  country  is 
divided  into  ten  districts,  each  with  its  army  of  officials  and 
patrolmen.  Illicit  manufacture  and  smuggling  are  punish- 
able by  law.  The  officials  are  charged  to  see  that  the  licensed 
manufacturers  and  merchants  pay  the  proper  fees  and  taxes 
and  that  they  buy  and  sell  at  authorized  prices  and  dis- 
tribute salt  within  definite  areas.  It  is  said  that  the  total 
product  is  not  less  than  25,000,000  piculs  (133%  pounds 
per  picul)  per  annum,  and  the  revenue  collected  not  less  than 
81,000,000  taels.1 

These  several  taxes,  together  with  the  grain  tribute  and 
certain  provincial  duties  and  contributions,  gave  a  total 
revenue  in  1901  of  88,200,000  taels,  divided  as  follows: 

Land  tax 26,500,000   K  P.  taels. 

Maritime  customs    23,800,000 

Regular  customs    2,700,000 

Leekin  customs    16,000,000 

Salt  gabelle    13,500,000 

Grain  commutation    3,100,000 

Other  levies  2,600,000 

This  revenue  was  quite  inadequate  to  the  needs  of  the 
Government;  but  the  fundamental  weakness  lay  in  the  de- 
centralized system  of  administration.  In  actual  practice  the 
various  taxes  (except  the  maritime  customs)  had  been  pro- 
vincialized and  the  Board  of  Revenue  merely  received  quotas 
and  contributions  and  held  the  provincial  treasurers  re- 
sponsible for  their  regular  remittance.  The  Government  in 
short  exercised  only  a  supervisory  power.1  The  fiscal  prac- 
tices resembled  a  feudal  hierarchy.     The  Board  of  Revenue 

1  Under  the  Republic  this  revenue  is  undergoing  rapid  reorganization. 
*  The  Customs  Administration  is  an  exception  to  this  rule. 


62  THE  CURRENCY  PROBLEM  IN  CHINA  [322 

demanded  a  minimum  from  each  Province.  The  provincial 
administration  in  turn  demanded  from  the  fus  and  hsiens, 
the  administrative  units,  regular  quotas.  A  large  portion 
of  the  sums  collected  never  reached  the  Government,  but 
disappeared  in  one  way  or  another  at  the  different  stages  of 
remission.  The  published  reports  of  the  Board  therefore 
could  not  give  any  clue  as  to  the  real  amounts  collected 
from  the  taxpayers.  It  rather  represented  a  percentage. 
Aside  from  its  abuses  this  established  system  had  its  funda- 
mental weakness  in  its  inelasticity.  At  an  emergency  the 
Government  could  only  rely  on  the  Provinces  to  forward 
additional  quotas  and  requisitions.  Such  an  emergency  oc- 
curred in  the  war  with  Japan  and  again  after  the  upheaval 
of  1900.  The  Board  of  Revenue  made  an  apportionment 
of  the  new  requirements  in  1898  and  again  in  1901.  The 
latter  brought  forth  a  vigorous  protest  signed  by  all  the  pro- 
vincial governors  and  viceroys. 

Such  was  the  financial  situation.  The  inadequacy  of  the 
old  methods  of  taxation  and  the  urgency  of  establishing  an 
elastic  system  of  revenue,  independent  of  the  provincial  ad- 
ministrations, were  made  apparent. 

We  are  now  ready  to  examine  the  bearing  of  the  fall  of 
silver  exchange,  or  the  fall  in  the  gold  price  of  silver,  on  the 
government  finances. 

This  fall  in  the  gold  value  of  silver  after  1873  had 
occasioned  many  heated  political  controversies  and  has- 
tened many  fundamental  alterations  in  the  currency 
systems  of  several  countries  in  the  West.  It  was  the 
subject  of  numerous  international  conventions  and  con- 
ferences. Yet  until  the  opening  of  the  new  century 
it  had  little  influence  on  the  Government  at  Peking. 
It  had  always  been  a  disturbing  factor  in  China's  for- 
eign trade  but,  had  it  recognized  this  world-wide  phe- 
nomenon at  all,  the  then  Imperial  Government  did  not  care 


323]  CURRENCY  REFORM  63 

to  develop  that  trade  which  in  those  days  was  regarded 
as  a  concession  to  the  foreigners.  After  the  war  with  Japan 
the  situation  changed.  During  the  six  years  1895-1901, 
there  had  accumulated  a  debt  of  formidable  magnitude, 
amounting  in  gold  money  to  £120,000,000.  The  exchange 
during  these  few  years  had  been  steady.  The  rapid  decline 
began  in  the  latter  months  of  1901.  In  1902  the  rate  started 
at  26%  d.  per  oz.,  about  35 d.  to  the  Haiknan  tael,  and  in 
November  reached  its  minimum  at  21  1  i/i6d.  per  oz.  or  less 
than  30c/.  per  tael.  All  the  calculations  of  the  Board  of 
Revenue  in  apportioning  the  new  expenditures  were  ren- 
dered useless.  The  uncertainty  with  regard  to  the  exchange, 
or  to  use  the  more  familiar  expression,  the  silver  price  of 
gold,  rendered  the  revenues  deficient  in  the  payment  of 
foreign  obligations  and  made  the  future  doubtful. 

A  difference  of  opinion  at  once  arose  over  the  interpre- 
tation of  the  Protocol.  Was  it  a  fixed  indemnity,  namely, 
450,000,000  HK.  taels,  or  was  it  the  equivalent  of  that  sum 
in  gold  which  at  the  rate  of  3^.  per  tael  (the  rate  prevailing' 
early  in  1901)  was  £67,500,000?  This  point  was  certainly 
not  emphasized  at  the  signing  of  the  Protocol  and  might  not 
have  impressed  the  Chinese  plenipotentiaries  as  anything 
important.  It  now  meant  a  difference  of  many  millions; 
for  if  it  were  a  gold  debt  it  would  be  at  the  new  rate  of 
exchange  2s.  6d.}  the  rate  in  December,  not  450,000,000 
taels  but  540,000,000!  The  Wai-wu  Bu  (Foreign  Office) 
opened  negotiations  and  carried  on  a  long-drawn  controversy 
with  the  foreign  ministers  at  Peking  on  the  question  of 
currency.  Finally  the  dispute  was  settled  in  favor  of  the 
European  powers.1 

1  Emperor  Kuang  Hsu's  State  Papers,  year  30,  p.  42.  While  the  con- 
troversy was  going  on  the  difference  accumulated  into  a  new  debt,  which 
threatened  to  grow  into  huge  proportions.  The  matter  was  settled  in  1904. 
The  interpretation  placed  upon  the  Protocol  by  the  European  Govern- 


64 


THE  CURRENCY  PROBLEM  IN  CHINA 


[324 


The  financial  problem  of  China  closely  resembled  the 
problem  that  was  facing  British  India  in  1892-3.  The  stan- 
dard of  Indian  currency  was  then  silver,  with  the  silver 

merits  was  accepted.  To  render  the  effects  of  the  fluctuations  less 
annoying,  it  was  agreed  that  the  instalments  should  be  paid  monthly  at 
the  average  monthly  rate  of  exchange.  The  Government  of  the  United 
States  took  China's  side  in  these  negotiations. 

There  could  be  no  difference  of  opinion  with  regard  to  the  loans 
made  in  1895-8,  which  were  explicitly  gold  loans. 

Gold  Price  of  Silver  in  the  London  Market  (Compiled  from  the 

U.  S.  Mint  Reports) 

in  monthly  averages  during  the  three  years  1 901 -2-3 

Equivalent  of  a 
Lowest. 


1901. 


Highest. 


Average  line  ounce  with 

{Br,  Standard),     the  exchange 


January   29  9/16 

February 28  7/16 

March    28^ 

April    27  15/16 

May    2^y& 

June   275/s 

July    27K 

August    27% 

September    ...  27 

October   26^ 

November    . . .  26l/2 
December    ....  25^ 
1902. 

January   26  1/16 

February 25*^ 

March    25  7/16 

April    24% 

May    24^ 

June   24  7/16 

July    24  7/16 

August    24  7/16 

September    . . .  24^5 

October   23  11/16 

November    . . .  2354 
December   ....  22^$ 


d. 

d. 

at  par. 

v?Ya 

28.9735 

$0.63513 

27% 

28.1592 

.61728 

27  5/16 

27.9495 

.61268 

26  15/16 

27.2925 

.59828 

27  3/16 

27.4189 

.60105 

*7% 

27.4200 

.60107 

26  13/16 

26.9629 

.59107 

2624 

26.9375 

.59050 

26% 

26.9650 

•59IIO 

26^ 

26.6157 

•58344 

25V& 

26.0913 

.57150 

24  15/16 

25.4475 

.55783 

2SH 

26.6250 

•56i73 

25  5/16 

25.4140 

•557II 

24  13/16 

25.0078 

.54820 

23  5/16 

24.3221 

.53316 

23  5/16 

23.6990 

.51950 

23  15/16 

24.1850 

.53016 

24  3/16 

24.3680 

.53416 

24  3/16 

24.2259 

.53106 

23  9/16 

23.8750 

.52326 

2454 

23.4004 

.51296 

21  11/16 

22.6925 

.49731 

21  13/16 

22.2067 

.48679 

325]  CURRENCY  REFORM  65 

rupee,  a  coin  of  the  legal  weight  of  180  grains,  11/ 12  fine, 
as  the  monetary  unit,  established  by  a  law  of  1835.  Until 
1873  tne  average  gold  price  of  the  rupee  had  been  fairly 
steady  at  2s.  per  rupee.  During  the  subsequent  20  years 
the  gold  price  had  fallen  till  it  dropped  below  15^.  The 
average  for  the  year  1892-3  was  14.984 d.  per  rupee  while 
the  average  price  for  the  previous  year  had  been  16.733d. 
Meanwhile  India  had  to  continue  remitting  large  sums  to 
England,  and  as  her  revenues  were  collected  in  silver  this 
sudden  depreciation  of  her  currency  made  the  situation  in- 
tolerable. The  Government's  calculated  surplus  of  Rx 
146,600  for  the  year  1892-3  was  converted  into  a  deficit  of 
Rx  1,081,900  in  spite  of  the  increase  of  the  revenue  over 
the  Budget  Estimate  by  Rx  1,653,300.  What  Sir  David 
Barbour,  the  Financial  Member  of  the  Indian  Council,  said 
in  connection  with  this  difficulty  helps  one  to  appreciate 
the  corresponding  difficulty  of  China. 

The  immediate  effect  of  our  financial  difficulties  and  the 
cause  which,  by  comparison  and  for  the  time  being,  dwarfs  all 
others,  is  the  fall  in  the  gold  value  of  silver,  which  has  added 
to  the  Indian  expenditure  in  two  years  more  than  four  crores 
of  rupees  [a  crore  is  10,000,000].  If  that  fall  could  be  stopped 
and  the  rate  of  exchange  with  England  fixed  permanently  at 

1903. 

January  22^  21  11/16  21.9838  .48191 

February 22  5/16  21%  22.1093  .48466 

March  22   15/16  22^  22.5000  49322 

April  25  1/16  22^  23.3550  .51196. 

May  25^  24  5/16  24.8894  .54560 

June  24  9/16  24^  24.3300  .53334 

July  25^  24^  24.8611  .54498 

August  26M  25  5/16  25.6009  .56120 

September  ...  27  9/16  26%  26.7524  .58644 

October  28^2  277/16  27.8935  .61145 

November  . . .  27^  26J4  27.0050  -59198 

December  26  7/16  25  3/16  25.7355  .56415 


66  THE  CURRENCY  PROBLEM  IN  CHINA  [326 

even  its  present  low  figure,  the  difficulty  of  dealing  with  the 
present  deficit  would  be  comparatively  slight.  The  revenue 
continues  to  grow  in  a  satisfactory  manner;  even  under  the 
influence  of  an  indifferent  season  and  poor  harvest  it  has  made 
fair  progress.  If  we  could  feel  assured  that  there  would  be  no 
further  fall  in  exchange,  I  have  little  doubt  that  increase  of 
revenue,  reduction  of  expenditure,  with  possibly  some  taxation 
of  a  temporary  nature,  would,  in  a  very  short  time,  re-estab- 
lish equilibrium.  A  serious  effort  would  no  doubt  be  required 
in  the  first  instance,  but  with  a  fixed  rate  of  exchange  we 
should  have  a  definite  task  before  us,  and  our  measures  could 
be  regulated  accordingly.  But  it  unfortunately  happens  that 
unless  some  settlement  of  the  currency  question  is  obtained, 
there  is  no  prospect  of  even  the  most  moderate  degree  of  sta- 
bility of  the  rate  of  exchange 

Our  financial  position  for  the  coming  year  is  at  the  mercy 
of  exchange,  and  of  those  who  have  it  in  their  power  to  affect 
in  any  way  the  price  of  silver.  If  we  budget  for  the  present 
deficit  of  Rx  1,595,000  and  the  exchange  rises  one  penny,  we 
shall  have  a  surplus ;  if  it  falls  a  penny  we  shall  have  a  deficit 
of  more  than  three  crores ;  if  we  impose  taxation  to  the  extent 
of  one  and  a  half  crores  of  rupees,  a  turn  of  the  wheel  may 
require  us  to  impose  further  taxation  of  not  less  magnitude; 
another  turn,  and  we  may  find  that  no  tax  at  all  was  required. 
It  will  be  obvious,  from  what  I  have  just  said,  that  what  we 
have  got  to  consider  in  making  our  arrangements  for  next 
year  is  not  so  much  the  question  of  increasing  the  public  reve- 
nue or  restricting  that  portion  of  the  public  expenditure  which 
is  under  control,  but  the  chances  of  a  settlement  of  the  cur- 
rency question. 

Later  we  shall  have  occasion  to  discuss  the  policy  adopted 
by  India.  Meanwhile  it  is  pertinent  to  note  that  with  a 
sound  fiscal  system  exchange  disturbances  are  dreaded  be- 
cause nothing  is  more  harmful  than  an  uncertainty  concern- 
ing the  value  of  the  tax  yields.  The  financial  difficulties  of 
the  Chinese  Government,  pressing  as  they  were,  would  have 


327]  CURRENCY  REFORM  67 

been  felt  much  more  keenly  had  there  been  a  centralized 
and  responsible  fiscal  administration.  As  matters  stood, 
the  Imperial  Government  was  able  nominally  to  shift  the 
increased  burden  upon  the  provincial  authorities  by  increas- 
ing their  quotas. 

Of  course,  the  effect  of  the  disturbances  of  the  rate  of 
exchange  between  gold-  and  silver-using  countries  was  not 
confined  to  India  and  China,  but  was  worldwide.  The  first 
years  of  the  new  century  saw  fundamental  currency  reforms 
in  many  countries.  The  Government  of  the  United  States 
was  the  first  to  take  action  in  the  Philippine  Islands,  lately 
ceded  to  her  by  Spain.  The  currency  conditions  in  these 
Islands  were  described  as  chaotic,  and  the  Government  of 
the  United  States  after  an  investigation  decided  to  reform 
the  currency  and  introduce  a  new  coinage  on  a  par  with 
gold.  No  definite  action  was  taken  until  March  2,  1903, 
on  account  of  the  disagreement  in  the  U.  S.  Senate. 

Siam  by  a  royal  decree  issued  on  November  25,  1902, 
adopted  the  gold-exchange  standard  by  what  is  described  as 
the  "  fixity-of -exchange  "  method.1  The  royal  mint  was 
closed  to  the  free  coinage  of  silver,  and  the  government 
placed  the  tical  on  a  gold  basis  by  fixing  its  selling  price 
from  time  to  time.  The  rate  was  raised  gradually;  thus 
at  the  time  when  the  mint  was  closed  21%  ticals  were  equal 
to  a  pound  sterling  in  the  market,  and  the  government  made 
the  first  sales  at  the  rate  of  20  taels  to  the  pound  sterling. 
The  selling  price  was  soon  raised  to  ig}4  and  in  June  of 
1903  the  government  was  selling  at  18J4.  The  profits  were 
set  aside  to  form  a  gold  reserve.  The  Siamese  policy  was 
largely  based  on  the  Indian  Government  policy.1 

1  Prof.  Edwin  R.  A.  Seligman,  Principles  of  Economics,  p.  508. 

2  Siam  finally,  by  the  gold-standard  act,  1908,  fixed  the  tical  at  13 
ticals  to  the  pound  sterling.  A  10-tical  gold  coin,  the  dos  weighing  6.2 
grams  .900  fine,  was  decreed  the  standard  coin. 


68  THE  CURRENCY  PROBLEM  IN  CHINA  [328 

Great  Britain  and  France  took  action  simultaneously  in 
their  silver-using  colonies,  the  former  in  the  Straits  Settle- 
ments and  the  Malay  Federated  States,  and  the  latter  in  the 
French  Indies.  Each  appointed  a  commission  to  devise 
feasible  plans  to  reform  the  currency. 

Meanwhile  Mexico,  next  to  China  the  largest  remaining 
silver-standard  country,  proposed  to  the  Government  of  the 
United  States  an  international  inquiry  into  the  silver  situ- 
ation, and  in  taking  this  initiative  the  Mexican  Government 
declared  that  its  main  object  was  to  find  methods  whereby 
the  stability  of  the  rate  of  exchange  between  silver-standard 
and  gold-standard  countries  could  be  established  without 
thereby  preventing  the  nations  then  using  silver  coin  from 
continuing  the  same  circulation.  Some  regularity  in  the 
purchase  of  silver,  if  possible,  was  also  to  be  effected.  The 
Chinese  Government  joined  Mexico  in  inviting  the  co- 
operation of  the  United  States. 

The  main  point  emphasized  in  asking  the  Government 
of  the  United  States  for  an  international  inquiry  and  for 
assistance  in  inaugurating  a  sound  system  of  currency  was 
the  injurious  influence  of  the  fluctuating  rate  of  exchange 
upon  international  commerce.  The  immediate  financial 
crisis  in  China  was  likewise  a  commercial  crisis.  China 
being  practically  a  silver-standard  country  in  her  commer- 
cial relations,  while  the  foreign  countries  with  which  she 
trades  deal  on  the  gold  basis,  the  profits  on  each  trans- 
action depend  largely  on  the  exchange  rates  between  the 
two  metals  every  day  at  the  London  market.  In  the  face 
of  violent  fluctuations  such  as  those  that  occurred  in  1902- 
3  international  trade  was  attended  with  great  risk.  Mr. 
Alfred  I.  Hippisley  of  the  Chinese  Maritime  Customs  Ser- 
vice gives  the  following  illustration :  * 

1  Report  of  Commission  on  International  Exchange,  1904,  p.  183. 


329]  CURRENCY  REFORM  69 

The  value  of  the  Haikuan  tael  was  3^.  yd.  in  February  (1904) 
and  2s.  yyd.  in  April.  Suppose  a  merchant  invested  £10,000 
in  tea  costing  15  tls.  per  picul  in  February  (one  picul  —  133^3 
lbs).  His  £10,000  would  realize  65,850  taels,  which  would 
purchase  4,390  piculs  of  tea.  Before  this  tea  can  reach  Europe, 
merchant  B  taking  adyantage  of  the  fall  in  exchange,  also  in- 
vests £  10,000  in  April  in  similar  tea.  His  £10,000  realizes 
75,590  taels,  with  which  he  purchases  5,039  piculs.  The  latter 
purchase  having  been  telegraphed  to  Europe,  the  price  of  this 
tea  will  at  once  fall  there,  and  merchant  A  will  not  be  able  to 
dispose  of  his  tea  except  at  a  serious  loss.  Again,  in  February, 
exchange  then  ruling  at  3^.  yd.,  a  foreign  merchant  calcu- 
lates that  he  can  sell  gray  shirtings  on  the  Shanghai  market 
with  a  small  profit,  at  3  tls.  per  piece,  and  he  enters  into  a  con- 
tract to  deliver  21,950  pieces  at  that  price.  He  delivers  the 
goods  in  April  and  receives  his  65,850  taels.  This  sum  repre- 
sented £10,000  at  the  time  he  made  the  contract,  but  when  paid 
to  him  it  will  only  realize  £8,711,  so  that  instead  of  the  profit 
he  had  calculated  upon,  he  has  to  face  a  loss  of  £1,289,  or 
almost  13  per  cent. 

The  attitude  of  the  Chinese  Government  on  this  subject 
was  outlined  in  the  memorandum  which  the  Charge  d' Af- 
faires Mr.  Shen  Tung  handed  to  the  Secretary  of  State 
of  the  United  States,  Mr.  John  Hay,  January  22,  1903. 
The  memorandum  emphasized  China's  concern  to  promote 
wholesome  trade  relations  with  the  gold-standard  coun- 
tries and  pointed  out  that  when  the  variations  in  the  gold 
value  of  silver  reached,  as  in  1902,  nearly  10  cts.  an  oz.  in 
gold  in  a  single  year,  or  nearly  20  per  cent  upon  the  price 
of  silver  bullion,  this  trade  was  rendered  extremely  hazard- 
ous and  was  threatened  with  destruction.  Hence  to  es- 
tablish stability  in  the  exchange  was  urgent,  and  inasmuch 
as  China  had  ( 1902)  over  one-third  of  the  total  trade  between 
gold-  and  silver-standard  countries  the  subject  was  one  of 
large  concern  for  the  gold-standard  countries  as  well  as  for 


jO  THE  CURRENCY  PROBLEM  IN  CHINA  [330 

China  herself.  China's  import  trade  was  capable  of  great 
expansion  because  the  trade  then,  though  large  in  volume 
compared  with  the  other  silver-using  countries,1  was  in- 
significant compared  with  her  population,  her  enormous 
extent  of  territory,  and  her  natural  resources.  If  her  for- 
eign trade  should  grow  as  fast  as  that  of  Japan  in  the  pre- 
vious decade,  an  expansion  of  from  $1.25  to  $3.00  per 
capita,  the  imports  into  China  would  reach  at  the  end  of 
the  decade  $1,200,000,000.  In  inviting  the  co-operation 
of  the  United  States  to  take  the  lead  in  an  international 
concert  of  action,  China's  desire  was  to  find  the  monetary 
causes  which  threatened  the  normal  development  of  this 
trade.     The  memorandum  goes  on  as  follows : 

The  Government  of  China  does  not  seek  the  restoration  of  the 
free  coinage  of  silver  by  either  the  gold-  or  silver-using  nations. 
It  is  recognized  by  this  Government  that  bimetalism  in  the 
sense  of  free  coinage  of  both  metals  is  a  policy  which  has  been 
definitely  discarded  by  the  leading  powers  of  Europe  and  by 
the  United  States,  and  that  it  would  be  futile  to  propose  its 
restoration. 

It  is,  therefore,  not  the  expectation  nor  the  wish  of  this 
Government  that  the  gold-standard  countries  should  take  any 
action  tending  to  impair  their  monetary  systems.  It  is  de- 
sired that  the  Governments  of  gold  countries  having  dependen- 
cies where  silver  is  used,  and  the  Governments  of  silver  coun- 
tries shall  cooperate  in  formulating  some  plan  for  establishing 
a  definite  relationship  between  their  gold  and  silver  moneys, 
and  shall  take  proper  measures  to  maintain  such  relationship. 
One  such  plan,  it  is  reported,  has  already  been  proposed  in 
both  Houses  of  the  Congress  of  the  United  States  with  refer- 
ence to  the  Philippine  Islands.  It  is  this  and  other  plans  de- 
signed to  accomplish  the  same  end  which  the  Government  of 

1  The  imports  of  16  silver-standard  countries  (1902)  amounted  to 
$574,627,323.    Those  of  China  $196,934,342. 


33 1  ]  CURRENCY  REFORM  yi 

China  would  be  glad  to  have  considered  by  the  United  States 
and  other  Governments,  with  the  view  to  the  adoption  of  the 
best  attainable  monetary  arrangement  by  those  countries  which 
are  not  prepared  under  existing  conditions  to  adopt  a  currency 
system  involving  the  general  use  of  gold  coins.1 

The  Government  of  the  United  States  responded  to  the 
invitation  of  Mexico  and  China  by  an  Act  of  Congress 
creating  the  Commission  on  International  Exchange,  March 
3,  1903.  The  Commissioners  appointed  were  Messrs.  Hugh 
H.  Hanna,  Charles  A.  Conant,  and  Jeremiah  W.  Jenks. 
The  Commission  was  directed  to  confer  with  the  Govern- 
ments of  Mexico  and  China  and  also  with  the  European 
Governments  for  the  purpose  of  formulating  some  definite 
and  feasible  policy. 

Meanwhile,  in  China  an  edict  wras  issued  on  the  22d  of 
April  creating  the  Financial  Commission  and  ordering  the 
establishment  of  a  central  mint  at  Tientsin.  The  edict  runs 
as  follows: 

It  has  been  a  recognized  principle  that  the  capability  of  a 
nation  to  exist  as  such  entirely  depends  upon  two  things,  the 
proper  adjustment  of  its  finances  and  the  employment  of  com- 
petent persons.  As  the  present  situation  is  very  critical,  and 
the  national  finance  [sic]  is  in  a  great  strait,  the  Government 
and  the  people  are  both  suffering  from  this  state  of  things. 
There  would  be  no  prospect  of  any  improvement  to  be  made 
in  our  fiscal  policy  unless  this  question  were  taken  up  and 
thoroughly  studied  in  all  its  bearings,  and  such  measures  as 
are  dictated  by  the  necessity  of  the  day  were  taken.  We 
hereby  command  Prince  Ch'ing  and  Ch'u  Hung  Chi,  in  con- 
junction with  the  Board  of  Finance,  to  consider  carefully  all 
necessary  steps  to  make  improvements  in  that  direction  and 
carry  them  out  with  diligence. 

1  Report  of  Com.  on  Int.  Exchange,  1903,  p.  45. 


j2  THE  CURRENCY  PROBLEM  IN  CHINA  [332 

At  present  the  silver  coins  used  in  different  provinces  are 
of  different  designs  and  quality,  and  their  weight  is  also  not 
uniform.  This  state  of  things  entails  a  great  inconvenience 
to  the  mercantile  class,  and  it  is  therefore  very  imperative 
that  a  uniform  device  for  silver  coin  should  be  designed,  and 
a  mint  should  be  established  in  Peking  [later  Tientsin  was 
chosen  as  a  preferable  location]  for  the  purpose  of  such  coin- 
age. As  soon  as  a  sufficient  amount  of  such  coin  shall  have 
been  turned  out  for  circulation,  all  national  revenues,  cus- 
toms duties,  etc.,  shall  be  collected  and  all  public  expenses 
shall  be  defrayed  in  that  coin  and  that  coin  alone,  with  the 
view  that  the  abuses  of  exacting  money  for  making  up  alleged 
insufficiency  in  weight  of  silver  ingots  which  are  now  used 
may  be  put  an  end  to  altogether.  At  any  rate,  uniformity 
must  be  preserved  with  regard  to  all  the  moneys  received  or 
sent  out  by  the  Board  of  Finance  or  by  various  provincial 
treasuries,  and  no  new  names  [sic]  shall  be  invented  for  that 
purpose  to  create  thereby  divergencies. 

We  also  command  you  to  make  exhaustive  investigations 
as  to  how  to  frame  satisfactory  regulations,  and  submit  them 
to  us  in  regular  order  for  enforcement.  In  short,  this  ques- 
tion is  of  great  importance  to  our  Empire,  and  will  be  of  great 
benefit  to  the  high  and  the  low.  You,  a  Prince  and  a  Minister 
of  the  State,  are  required  to  carry  this  out  with  undaunted 
courage,  unflinching  energy,  and  strong  determination,  in 
order  that  our  currency  may  be  improved,  and  the  benefit 
therefrom  will  be  so  widespread  as  to  gratify  our  earnest  de- 
sire to  benefit  our  people  by  adopting  necessary  reforms. 
Respect  this. 

With  the  appointment  of  the  Financial  Commission  in 
China  the  problem  of  currency  reform  was  taken  up  in  earn- 
est. Yet  the  prospect  of  its  prompt  and  satisfactory  solu- 
tion was  not  at  all  bright.  The  Financial  Commission  was 
not  exactly  a  currency  commission  charged  to  investigate 
the  currency  conditions,  and  its  members  were  not  men 
particularly  versed  in  this  particular  branch  of  knowledge. 


333]  CURRENCY  REFORM  73 

The  two  officials,  mentioned  in  the  edict,  were  both  high 
ministers  holding  important  portfolios;  Prince  Ch'ing  was 
the  head  of  the  Government  under  the  Empress  Dowager 
and  Ch'u  Hung  Chi  was  then  President  of  the  Board  of 
Foreign  Affairs,  the  Wai-wu  Pu.  Moreover,  nothing  had 
actually  been  accomplished  in  the  way  of  developing  cen- 
tralized governmental  machinery  to  replace  the  loose  politi- 
cal system.  As  we  shall  see  presently  the  Provinces  were 
continuing  their  independent  coinage  regardless  of  the  will 
of  the  Central  Government  and  the  general  interests  of  the 
people.  The  nature  of  the  currency  problem,  both  in  its 
national  and  international  aspects  was  but  very  imperfectly 
understood  by  the  officials.  The  ordinary  people  did  not 
even  realize  there  was  any  problem  at  all.  Without  speci- 
ally qualified  men  in  the  Government  councils  and  without 
effective  powers  to  put  any  comprehensive  plan  into  oper- 
ation immediate  results  could  hardly  be  expected. 

The  currency  regulations,  which  the  Financial  Commis- 
sion was  charged  to  frame,  were  not  completed  until  two 
years  after  its  appointment.  The  intervening  events  which 
will  bring  us  a  still  closer  understanding  of  the  problem  of 
reform  in  all  its  important  phases  may  now  be  followed. 

A  special  mission  headed  by  Prince  Tsai  Chen  and  Na- 
tung  was  sent  to  Japan  to  attend  the  Osaka  Exposition, 
Natung  was  charged  with  the  special  duty  of  looking  into 
and  reporting  on  the  Japanese  gold-standard  system  with 
the  view  to  its  introduction  into  China.  The  legations  in 
Europe  were  instructed  to  participate  in  the  conferences 
and  discussions  which  were  then  being  carried  on  by  the 
American  and  Mexican  Commissions  with  the  European 
Government  Commissions. 

Of  considerable  importance  at  this  time  was  the  me- 
morial of  the  Chinese  Minister  at  St.  Petersburg,  Hu 
Wei-te,  which  may  be  considered  before  the  American  plan. 


^upo 


74  THE  CURRENCY  PROBLEM  IN  CHINA  [334 

Mr.  Hu's  memorial *  led  to  the  first  steps  of  the  Financial 
Commission  toward  the  accumulation  of  a  gold  reserve  for 
the  gold-standard  system. 

The  American  and  Mexican  Commissions  had  just  com- 
pleted their  conferences  in  Europe  at  London,  Paris,  the 
Hague,  Berlin,  and  St.  Petersburg,  and  Professor  Jenks, 
one  of  the  three  members  of  the  American  Commission, 
had  been  designated  to  proceed  to  China  to  present  the 
American  plan.  Mr.  Hu  had  previously  been  instructed  to 
report  on  the  discussions  at  St.  Petersburg;  hence  the  me- 
morial, which  was  a  strong  plea  for  the  gold  standard. 

Mr.  Hu  gave  his  reasons  for  favoring  the  gold  standard 
in  the  following  passage : 

The  question  of  coinage  is  in  itself  a  nation's  own  affair; 
but  nowadays  there  is  not  anything  in  business,  commerce,  or 
government  that  does  not  mutually  involve  the  people  of  dif- 
ferent nations,  which  does  not  involve  foreign  exchange  [sic.]. 
If  the  monetary  systems  of  the  countries  do  not  agree,  it  is 
impossible  to  prevent  loss.  To  have  a  good  monetary  system, 
a  country  must  have  a  definitely  fixed  coinage,  using  gold, 
silver,  and  copper  at  a  definite  fixed  ratio.  The  coins  must  be 
of  the  same  pattern,  value,  and  fineness  throughout  the  coun- 
try, if  the  best  interest  of  the  people  is  to  be  considered  and 
it  is  desired  to  secure  the  faith  of  foreign  nations.  Those  who 
have  a  gold  standard  do  not,  for  that  reason,  suffer  any  loss  in 
exchange,  and  international  intercourse  is  easily  arranged. 

Financial  experts  have  estimated  the  year's  yearly  [sic] 
output  of  gold,  and  there  is  no  cause  for  concern  lest  it  be 
not  enough  for  the  supply  of  the  people  of  every  country.  As 
to  the  output  of  silver,  there  is  no  end  to  it.  The  greater  the 
supply  of  silver,  the  cheaper  it  gets,  so  that  the  present  high 
price  of  gold  is  not  in  reality  that  gold  is  dear  [sic]  but 
rather  that  silver  is  cheap.     China  has  made  a  practice  of 

1  Report  of  the  Int.  Exc.  Com.,  1904,  PP-  190-200. 


335]  CURRENCY  REFORM  75 

using  silver,  and  consequently,  using  this  as  a  standard,  the 
Chinese  consider  that  gold  has  daily  gotten  dearer.  Other 
countries  have  made  a  practise  of  using  gold,  on  the  other 
hand,  and  hence,  using  this  as  a  standard,  they  consider  that 
silver  has  daily  gotten  cheaper.  A  gold-standard  country  is 
like  a  man  who  has  accumulated  riches  to  buy  grain — if  the 
grain  is  cheap,  he  reaps  the  benefit.  A  silver-standard  coun- 
try is  like  a  farmer  who  has  accumulated  his  grain  and  holds 
it  for  a  rise  in  price — if  the  price  goes  down,  he  suffers.  So 
silver-using  countries  and  gold-using  countries  are  in  the  same 
case  as  two  people  making  a  barter,  in  which  one  man's  daily 
increase  of  loss  (on  account  of  his  waiting  each  day  for  a 
higher  price)  is  only  the  other  man's  daily  increase  of  gain. 
Therefore,  if  we  use  uncoined  silver  for  money  we  are  in  just 
such  a  case  of  barterers  [sic]  with  those  countries  which  have 
a  gold  coinage,  and  it  is  needless  to  say  which  country  is  the 
loser.  To  use  uncoined  silver  for  money  is  like  using  un- 
cooked rice  for  food  or  uncut  cloth  for  clothing,  for  uncoined 
silver  is  nothing  more  than  a  product  of  the  earth.  Other 
nations  consider  silver  merely  as  a  commodity  and  not  as 
money. 

It  is  already  hard  to  meet  our  demands,  and  hereafter  it 
will  be  all  the  harder  to  put  the  country  on  a  firm  footing. 
At  the  present  time  gold  is  used  in  all  nations  throughout  the 
world.  Even  among  their  dependent  countries  there  is  not 
one  which  does  not  use  gold.  Russia  in  Bokhara  uses  gold. 
England  in  India  uses  gold.  The  United  States  in  the  Philip- 
pines uses  gold.  England  is  now  planning  to  use  gold  in 
Hongkong,  and  Russia  has  already  begun  to  introduce  roubles 
into  Manchuria — just  as  if  Manchuria  were  one  of  her  own 
dependencies,  as  in  the  other  cases  mentioned.  Why  do  they 
hasten  so?  Because  when  a  country  plans  and  marks  out  a 
frontier  she  must  reckon  upon  its  expenses — for  is  not  the 
profit  of  her  dependency  the  nation's  own  profit  as  well?  It 
is  equally  evident  that  as  the  power  of  gold  increases  the  power 
of  silver  decreases,  consequently  a  country  will  spare  no 
efforts  or  endeavors  to  regulate  the  expenditures  so  that  her 


76  THE  CURRENCY  PROBLEM  IN  CHINA  [336 

dependency  will  not  be  a  burden  to  her.  Where  is  there  an- 
other nation  as  rich  as  China  in  land  and  subjects  which  would 
not  speedily  change  her  policy? 

It  is  very  evident,  then,  that  nations  which  have  not  a  gold 
standard,  but  keep  on  with  silver  at  a  debased  value,  will 
suffer.  The  system  of  coinage  as  adopted  by  the  other  nations 
has  a  fixed  value  in  relation  to  each  other,  and  although  there 
are  exchange  charges,  the  market  value  is  approximately  the 
same,  so  that  banks  have  no  change  to  impose  upon  the  people, 
nor  have  foreign  merchants  any  opportunity  for  swindling. 
If  China  has  a  uniform  national  coinage,  then  she  will  be  on 
the  same  footing  with  other  nations,  and  there  will  be  no 
cause  for  anxiety  in  the  matter  of  exchange.  The  three 
metals,  gold,  silver,  and  copper,  will  have  a  fixed  relative  value  ; 
one  silver  piece  being  worth  so  many  copper  ones,  and  one 
gold  piece  being  worth  so  many  silver  ones.  Once  fix  the 
relative  value,  and  it  must  follow  that  all  financial  affairs, 
large  and  small,  will  have  some  definiteness.  Coins  can  then 
be  used  everywhere,  far  and  near,  at  the  same  value.  Offi- 
cials and  people  can  then  use  them  without  having  them  dis- 
counted for  short  weight.  With  everything  uniform,  busi- 
ness affairs  will  be  easily  managed.  Rapacious  underlings 
and  dishonest  traders  will  have  no  opportunity  to  squeeze. 

Mr.  Hu  found  that  the  opponents  had  eight  objections  to 
the  gold  standard,  namely,  ( 1 )  that  the  economic  conditions 
did  not  admit  the  use  of  gold;  (2)  that  China  had  no  gold; 

(3)  that  the  Chinese  banks  and  cash-shops  would  oppose  it; 

(4)  that  the  officials  and  tax-collectors  would  oppose  it; 

(5)  that  the  provincial  administrations  would  oppose  it; 

(6)  that  complications  would  arise  out  of  the  indemnity 
payments;  (7)  that  the  gold  standard  might  collapse  on  ac- 
count of  the  unfavorable  balance  of  trade;  (8)  that  the  Gov- 
ernment did  not  have  the  necessary  power  and  energy  to 
introduce  successfully  such  a  reform.  These  objections 
were  not  all  to  the  point;  for  instance,  the  third  and  the 


337]  CURRENCY  REFORM  yy 

fourth  arguments,  which  might  be  urged  against  any  system 
of  uniform  coinage.  The  fifth  argument  was  based  on  the 
fact  that  the  Provinces  were  depending  upon  the  coinage  of 
silver  and  the  copper  coinage  to  make  up  deficiencies  in  the 
revenue.  Whatever  the  standard  might  be,  the  practice  of 
coinage  for  purposes  of  revenue  must  be  discontinued  and 
the  Provinces  must  be  prohibited  from  exercising  the  coin- 
age prerogative. 

Just  as  these  objections  were  not  strictly  to  the  point,  so 
Mr.  Hu's  rejoinders  were  mostly  vague  and  superficial : — 
for  instance,  the  answers  to  the  first  and  second  objections, 
which  were  at  the  time  regarded  as  the  main  reasons  why 
the  gold  standard  was  impracticable  in  China.  He  admitted 
that  the  economic  conditions  required  the  circulation  of 
copper  and  silver;  but  he  declared  that  the  gold-standard 
system  was  not  intended  to  replace  copper  and  silver  by 
gold  as  a  medium  of  exchange  and  that  the  adoption  of  the 
gold  standard  was  for  the  purpose  of  giving  foreign  nations 
confidence  in  China.  But  it  is  clear  that  if  the  silver  and 
copper  coins  were  to  be  based  on  gold  an  adjustment  would 
be  necessary.  The  complications  of  this  adjustment  to  a 
new  basis  he  completely  overlooked.  To  the  objection  that 
China  had  no  gold  for  coinage  he  merely  answered  that  in 
inaugurating  this  system  all  that  was  needed  was  to  let  the 
other  nations  know  that  China  had  a  gold  reserve  with  which 
to  maintain  the  fixed  ratio  between  gold  and  silver  in  circu- 
lation and  to  prevent  fluctuations.  As  to  how  to  get  the  re- 
serve he  suggested  that  a  loan  must  be  resorted  to.  A  gold 
coinage  of  1 5  per  cent  of  the  total  issue  was  needed.  As  to 
what  the  coinage  ratio  was  to  be  he  did  not  give  any  clue. 
Whether  the  gold  could  remain  in  the  country  he  did  not 
inquire,  nor  did  he  give  any  clear  notion  as  to  how  the  gold 
reserve  was  to  be  managed.  However,  this  omission  need 
cause  no  surprise  when  we  understand  what  he  meant  by  the 
gold  standard. 


78  THE  CURRENCY  PROBLEM  IN  CHINA  [338 

The  advantages  of  the  gold  standard  having  been  pointed 
out  and  the  alleged  objections  answered,  Mr.  Hu  proceeded 
with  the  consideration  of  a  plan  of  his  own.  His  plan  em- 
bodied suggestions  relating  to,  (1)  the  name  and  weight  of 
the  coins;  (2)  the  total  amount  to  be  coined ;  (3)  suspension 
of  the  old  coinage  and  the  ultimate  withdrawal  of  the  old 
coins;  (4)  the  manner  of  securing  the  necessary  bullion; 
(5)  the  introduction  of  the  coinage  into  circulation;  (6)  the 
manner  of  insuring  confidence  in  the  new  system. 

( 1 )  Name  and  weight  of  the  coins.  The  gold  coin  must 
be  worth  so  many  silver  coins  and  the  silver  coin  so1  many 
copper  ones,  each  piece  having  its  own  particular  name. 
The  coinage  unit  should  be  called  "  yuan  "  in  place  of  tael. 
He  recommended  that  this  new  unit  should  have  the  weight 
of  the  Mexican  dollars  (72  tl-cents  or  27.072  grams  902  7/9 
fine).  The  tael  he  considered  too  heavy;  and,  besides, 
there  was  no  such  coin  in  use.  The  unit  having  been  de- 
cided upon,  "  a  table  of  values  relative  to  gold  "  was  then 
to  be  arranged;  for  example,  10  silver  yuan  were  to  be 
worth  1  large  gold  piece  and  5  silver  yuan  one  small  gold 
piece.  Fractional  silver  coins  of  one,  two,  and  five-tenths 
of  the  yuan  were  to  be  coined.  The  copper  coinage  was  to 
be  made  a  part  of  the  system. 

(2)  The  amount  to  be  coined.  The  population  and  the 
standard  of  living  were  taken  as  the  criteria  to  determine 
the  amount  needed.  An  average  of  two  silver  dollars  per 
capita,  considered  sufficient  by  currency  experts,  was  recom- 
mended. The  total  would  be  approximately  800  million 
yuan.  If  one-fourth  was  to  be  coined  at  the  beginning, 
namely,  200  million  yuan,  15  per  cent  was  to  be  made  in 
gold  coins,  that  is,  30  million  yuan.  In  every  100  yuan 
there  should  be  one  gold  coin  of  10  yuan  value  and  one 
of  5  yuan  value;  the  remaining  85  yuan  should  be  in  silver 
coins.  Uniform  methods  and  designs  should  be  used  in 
the  central  and  the  branch  mints. 


339]  CURRENCY  REFORM  79 

(3)  The  withdrawal  of  the  old  coins.  The  old  coinage 
must  be  stopped  immediately  and  the  old  coins  withdrawn. 
During  the  first  years  the  Government  should  give  full 
market  value  in  taking  back  the  old  coins;  but  after  10  or 
more  years  they  might  be  demonetized.  The  new  silver 
yuan  was  to  be  920  fine,  the  remaining  80  parts  being  the 
nation's  seigniorage.  On  the  coinage  of  800  million  yuan 
the  profit  would  reach  64  million,  with  which  the  Govern- 
ment could  not  only  pay  its  debts  and  cost  of  coinage,  but 
also  form  a  gold  reserve. 

(4)  The  capital  outlay.  A  currency  loan  had  to  be  raised 
to  introduce  the  new  system.  Mr.  Hu  gave  specific  sugges- 
tions as  to  how  the  loan  was  to  be  negotiated. 

(5)  The  introduction  of  the  new  coinage.  When  the 
Government  had  decided  upon  the  date  when  the  new  coins 
were  to  be  put  into  circulation  the  Government  should  make 
its  disbursements  in  the  new  coins.  Taxes  also  should  be 
made  payable  in  the  new  coins.  As  soon  as  the  people  be- 
came familiar  with  the  new  coins  the  system  could  be 
rapidly  extended. 

(6)  The  manner  of  insuring  confidence  in  the  new  sys- 
tem. One  way  of  securing  confidence  was  to  deposit  the 
borrowed  gold  among  the  various  foreign  banks:  thereby 
the  foreign  nations  would  know  that  China  had  gold  in  re- 
serve. A  periodical  statement  of  mint  operations  must  be 
prepared  and  made  available  to  the  foreign  ministers  at 
Peking,  in  conformity  with  the  practice  of  other  nations. 

This  Mr.  Hu  called  a  gold-standard  plan ;  but  it  would  be 
a  mistake  to  conclude  that  it  would  have  established  a  true 
gold-standard  system.  The  crucial  question  is,  Would  the 
table  of  values  of  the  silver  coins  in  relation  to  gold  be  suc- 
cessfully maintained ;  that  is,  would  the  large  gold  coin  al- 
ways be  worth  10  silver  yuan  and  the  small  gold  coin  five 
yuan  ? 


80  THE  CURRENCY  PROBLEM  IN  CHINA  [340 

Now  Mr.  Hu  made  no  mention  of  the  coinage  ratio,  nor 
did  he  pay  any  attention  to  the  measures  whereby  the  silver 
coins  could  be  maintained  at  par  with  gold. 

Let  us  suppose  he  meant  to  accept  the  market  ratio,  and 
to  maintain  the  currency  on  the  gold  basis.  If  such  were 
his  plan,  the  experience  of  other  nations  shows  that  the 
system  would  be  deranged  should  the  gold  value  of  silver 
rise.  The  gold  standard  would  be  safe  only  if  the  gold 
value  of  silver  should  continue  to  fall.  Such  fluctuations 
as  occur  daily  could  not  be  controlled  nor  accurately  fore- 
told. For  this  reason  it  has  come  to  be  a  binding  principle1 
for  this  particular  species  of  gold  standard  to  select  a  coin- 
age ratio  somewhat  higher  than  the  market  ratio.  The 
maintenance  of  this  coinage  ratio  is  the  most  difficult  part 
of  the  whole  system.1  It  is,  however,  reasonable  to  sup- 
pose that  Mr.  Hu  did  not  see  these  complications  and  that 
his  meaning  was  quite  different  from  the  above  supposi- 
tion. For  in  China  at  this  date  to  coin  silver  and  gold  ac- 
cording to  a  fixed  ratio,  and  to  maintain  the  silver  coin 
and  the  subsidiary  coinage  thereafter  at  the  fixed  gold  value, 
was  a  strange  notion.  In  the  light  of  past  practice  and  con- 
temporary experience  there  is  every  reason  to  assume  that 
the  coinage  ratio  was  no  more  than  nominal  and  that  there 
would  be  no  efforts  made  to  maintain  the  coinage  par. 
What  Mr.  Hu  actually  meant  would  then  amount  to  the 
issue  of  gold  coins  in  addition  to  the  silver  and  copper 
coins;  very  much  as  in  contemporary  practice  silver  coins 
were  already  issued  in  addition  to  the  copper  coins. 

The  value  of  the  silver  coins  in  gold,  or  vice  versa,  must 
in  this  case  follow  the  market  exchange  ratio  of  the  two 
metals,  inasmuch  as  both  were  to  be  full  legal-tender  coins. 
The  gold  coins,  should  they  remain  in  circulation  at  all, 

1  This   point   will   be   considered   in   connection   with   the   American 
plan.     See  below. 


341  ]  CURRENCY  REFORM  8l 

would  be  just  so  many  new  additions  to  the  silver  and  cop- 
per circulation.  They  might  form  a  double  standard  with 
the  silver,  or  more  likely  would  resemble  the  gold  mohur  in 
British  India,  passing  from  hand  to  hand  like  a  commodity, 
being  bought  and  sold  on  the  basis  of  the  current  market 
price  of  gold.  It  is  evident  that  the  consideration  of  the 
coinage  ratio  and  the  maintenance  of  that  ratio  is  a  factor 
of  primary  importance.  By  overlooking  this  point,  Mr. 
Hu  left  the  whole  plan  fundamentally  defective  and  un- 
workable. 

The  Board  of  Revenue,  however,  was  much  impressed  by 
the  arguments  advanced,  and  subsequently  submitted  a  me- 
morial which  received  immediate  imperial  sanction.1  The 
Board  proposed  that  a  gold  reserve  be  accumulated  and  that 
ultimately  gold  coins  be  issued  in  addition  to  silver.  The 
Board  emphasized  the  fact  that  it  was  to  the  great  disadvan- 
tage of  China  to  use  silver  when  all  the  rest  of  the  world 
has  a  gold  standard.  It  further  maintained  that  there  is  a 
large  gold  hoard  among  the  people,  but  that  this  gold  had 
hitherto  been  used  solely  in  the  arts  because  it  had  not  been 
employed  as  currency.  To  obtain  the  gold  supply  for  mint- 
ing purposes  was  considered  urgent;  therefore,  the  Board 
proposed  that  the  money  paid  in  for  ranks,  titles  and  offices 
should  be  paid  one-half  in  gold.  Just  how  much  gold  was 
accumulated  under  this  act  is  not  known. 

Conditions  stood  thus  when  the  American  Commissioner, 
Professor  Jeremiah  W.  Jenks,  arrived  in  China  to  submit 
the  American  plan. 

The  American  Commissioner  arrived  in  China  early  in 
1904  (January)  and  stayed  through  the  month  of  August. 
He  presented  the  American  plan  to  the  Government  at  Pe- 
king ;  but  before  it  was  taken  up  and  discussed  in  detail  with 

1  Report,  cit.,  1904,  p.  201. 


82  THE  CURRENCY  PROBLEM  IN  CHINA  [342 

the  Financial  Commission  he  spent  considerable  time  in 
visiting  the  principal  commercial  cities  and  the  interior  Pro- 
vinces in  order  to  study  actual  conditions.  The  special  pur- 
poses of  making  this  study  were  stated  in  the  Report  of  the 
Commission  as  follows : * 

First.  To  secure  a  general  view  of  monetary  conditions 
in  China  and  of  the  methods  of  doing  business  under 
the  various  conditions  found  in  different  provinces.  In  the 
interior  many  days  were  passed  in  localities  where  no  money 
is  employed  excepting  copper  cash  and  chunks  of  silver 
(sycee)  which  have  to  be  weighed  out  by  scales  which  each 
dealer  or  traveler  keeps  for  the  purpose.  As  opportunity  of- 
fered, conversations  were  held  not  merely  with  officials  of  all 
ranks,  but  also  with  bankers,  merchants,  and  even  with  day- 
laborers,  local  traveling  peddlers,  roadside  workmen  etc.  In 
this  way  a  reasonably  accurate  idea  was  secured  of  the 
methods  of  conducting  business  without  any  generally  recog- 
nized currency  and  of  the  probable  ability  of  the  people  of 
all  classes  to  deal  with  a  new  and  uniform  money. 

Second.  Conferences  with  the  officials  from  day  to  day, 
both  those  of  high  rank,  such  as  viceroys  and  governors,  and 
those  of  lesser  rank,  such  as  local  district  magistrates,  gave 
an  opportunity  to  estimate  the  qualifications  of  those  in  whose 
hands  would  need  to  be  placed  to  a  greater  or  less  extent  the 
administration  of  the  new  system  when  it  should  be  adopted. 

Third.  The  attitude  of  the  people  of  various  classes,  offi- 
cials, business  men,  and  common  people,  toward  a  change  in 
the  system  and  toward  the  new  monetary  system  suggested, 
was  ascertained. 

Fourth.  Opportunity  was  offered  to  explain  in  part  the 
main  points  of  the  system  proposed  to  the  viceroys  and  other 
leading  men,  officials,  bankers,  merchants,  etc.,  so  that  thus 
valuable  criticism  of  the  plans  from  the  point  of  view  of  those 
familiar  with  local  conditions  was  secured,  and  in  many  cases 

1  Report  of  the  Com.  on  Int.  Exc,  1904,  pp.  14-15. 


343]  CURRENCY  REFORM  83 

opportunity  was  offered  to  remove  from  the  minds  of  those 
who  did  not  understand  the  purpose  of  the  invitation  of  the 
Chinese  Government  or  its  attitude  toward  the  United  States 
in  this  matter  the  natural  suspicion  regarding  the  motive  of 
the  United  States  in  undertaking  this  work;  and,  further- 
more, objections  which  would  naturally  occur  to  those  not 
familiar  with  the  administration  of  currency  systems,  were 
overcome. 

A  pamphlet  entitled  Memoranda  on  a  New  Monetary  Sys- 
tem for  China,  containing  the  main  paints  of  the  currency 
plan,  was  issued  both  in  English  and  in  Chinese  and  distri- 
buted. This  pamphlet  was  circulated  extensively  among  the 
officials,  influential  business  men  and  the  press.  Later  in 
the  year,  a  second  pamphlet  was  issued,  entitled  Considera- 
tions on  a  Monetary  System  for  China.  In  it  arguments 
in  favor  of  the  American  plan  and  estimates  of  cost  were 
presented  in  detail  and  objections  to  the  plan  were  answered. 
It  was  pointed  out  that  there  were  only  two  alternatives 
before  the  Government  in  introducing  a  national  coinage 
system.  The  Government  must  begin  either  on  the  silver 
standard  or  on  the  gold  basis.  The  American  commission 
favored  the  gold  standard.  The  proposals  embodied  in  the 
American  plan  may  be  summarized  as  follows: 

A  unit  consisting  of  a  definite  amount  of  gold  was  to  be 
adopted.  It  need  not  be  coined,  but  provision  was  to  be 
made  for  the  free  coinage  on  demand  of  multiples  of  this 
unit.  There  was  to  be  a  standard  silver  coin,  the  repre- 
sentative of  this  unit.  The  bullion  value  of  this  silver 
coin,  which  was  to  be  current  with  unlimited  legal-tender 
quality,  must  be  less  than  the  par  value  to  allow  for  upward 
and  downward  movements  in  the  gold  price  of  its  bullion 
content.  The  coinage  ratio  recommended  was  32  to  1, 
which  was  about  20  per  cent  higher  than  the  market  ratio 
of  the  time.     The  new  coin  must  be  received  at  its  coin  value. 


84  THE  CURRENCY  PROBLEM  IN  CHINA  [344 

To  maintain  the  parity  of  this  unit  and  its  subsidiary  coins 
with  the  gold  standard  the  followng  measures  that  had 
proved  sufficient  elsewhere  were  recommended :  ( i )  Govern- 
ment control  of  the  amount  of  the  issues,  so  as  to  keep  them 
within  the  demands  of  trade  for  legal-tender  money;  (2) 
prompt  acceptance  of  the  new  coins  everywhere  in  the  coun- 
try at  their  gold  value  by  the  Government  in  payment  of 
public  dues;  (3)  making  private  debts  payable  in  the  new 
coin;  (4)  the  sale  of  drafts  at  or  near  par  upon  gold  re- 
serves kept  at  some  convenient  place  abroad. 

The  first  three  measures  were  regarded  as  sufficient  to 
maintain  the  parity  of  the  coins  within  the  country.  The 
last  measure  was  a  provision  for  meeting  the  payment  of 
obligations  to  creditors  in  foreign  countries.  Since  in  in- 
ternational trade  what  is  needed  to  settle  the  balance  of  pay- 
ment is  a  gold  credit,  it  was  considered  sufficient  to  keep 
a  gold  reserve  abroad  against  which  the  Government  could 
sell  drafts  in  case  of  necessity.  A  considerable  gold  re- 
serve must  be  kept  to  maintain  the  parity  of  the  silver  coins. 
To  obtain  this  reserve  it  was  thought  necessary  for  China 
to  make  a  loan  at  the  beginning.  The  high  seigniorage 
profits  from  the  coinage  of  the  silver  standard  coins  and  the 
fractional  pieces  were  to  go  to  strengthen  the  reserve.  As 
the  chief  means  of  replenishing  this  reserve  after  its  re- 
duction by  the  sale  of  drafts,  the  controller  was  to  honor 
silver  drafts  drawn  by  the  agents  of  the  Treasury  abroad  in 
exchange  for  gold.  Such  transactions  must  necessarily 
take  place,  since  it  was  provided  that  the  money  re- 
ceived in  exchange  for  foreign  drafts  was  not  to  be 
reissued  but  held  in  the  vaults.  The  resulting  contraction 
of  the  currency  would  make  it  more  profitable  to  ship  mer- 
chandise to  meet  foreign  obligations  than  to  withdraw  from 
circulation  legal-tender  money  which  had  acquired  scarcity 
value.     On  the  other  hand,  business  men  would  find  it  more 


345]  CURRENCY  REFORM  85 

profitable  to  get  the  coins  needed  to  meet  their  obligations  in 
China  by  exchanging  gold  for  the  legal-tender  silver  coins 
at  the  Government  bureau,  or  by  purchasing  silver  drafts 
from  the  agents  of  the  Treasury  abroad.  To  secure  the 
elasticity  of  the  currency  it  was  provided  that  the  central 
bank  should  be  prepared  to  issue  a  convertible  note  cur- 
rency.    Such  are  the  main  points  of  the  system. 

Evidently  this  system  would  require  careful  handling. 
The  great  difficulty  was  that  China  had  not  experienced 
government  financiers  competent  to  undertake  the  intro- 
duction of  so'  subtle  a  plan.  On  this  ground  it  was  proposed 
that  China  appoint  a  foreigner  as  controller  of  the  currency 
with  sufficient  powers  and  suitable  associates. 

It  may  be  helpful  to  give  the  American  Commission's 
own  summary  of  its  plan  as  presented  for  consideration  by 
the  Chinese  Government.1 

The  Seventeen  Suggestions 

1.  The  Chinese  Imperial  Government  promptly  to  take  ef- 
fective steps,  satisfactory  to  a  majority  of  the  indemnity 
treaty  powers,  to  establish  a  general  monetary  system  consist- 
ing chiefly  of  silver  coins  with  a  fixed  gold  value. 

2.  In  the  establishment  and  management  of  this  system 
China  to  invite  and  employ  acceptable  foreign  assistance. 

3.  In  pursuance  of  this  plan,  the  Chinese  Government  to 
appoint  a  foreign  controller  of  the  currency,  who  shall  have 
general  charge  of  the  system  for  China ;  he  to  have  acceptable 
associates  in  charge  of  the  mint  or  of  such  work  as  he  may 
prescribe. 

4.  The  controller  to  make  monthly  reports  in  detail  of  the 
condition  of  the  currency,  including  amounts  in  circulation, 
loans,  drafts  on  foreign  credits,  etc.  His  accounts  (but  not 
those  of  the  general  Government)  to  be  open  at  reasonable 
times  to  inspection  by  accredited  representatives  of  the  powers 

1  Report  of  the  Com.  on  Int.  Exc,  1904,  pp.  80-1. 


86  THE  CURRENCY  PROBLEM  IN  CHINA  [345 

interested  in  the  indemnity,  provided  the  Chinese  Government 
judges  that  such  a  provision  would  be  wise  in  order  to  secure 
confidence  in  the  system.  Such  representatives,  as  also  the 
associate  controllers,  to  have  the  right  of  suggestion  and 
recommendation. 

5.  The  Chinese  Government  to  adopt  a  standard  unit  of 
value.  The  unit  to  consist  of  .  .  .  grains  of  gold,  and  to  be 
worth  presumably,  approximately,  the  gold  value  of  a  tael,  or 
somewhat  more  than  a  Mexican  dollar.  Provision  to  be  made 
for  the  free  coinage  of  suitable  pieces,  multiples  of  this  unit, 
5,  10,  and  20,  on  demand,  for  a  reasonable  coinage  charge. 
Eventually  some  to  be  coined  on  Government  account. 

6.  China  to  coin  as  rapidly  as  possible  .  .  .  silver  coins, 
with  an  appropriate  device,  about  the  size  of  a  Mexican  dol- 
lar, for  circulation  in  the  country.  These  to  be  maintained 
at  par  with  the  standard  gold  unit  at  a  ratio  of  about  32  to  1. 
More  to  be  coined  thereafter,  according  to  needs,  as  indicated 
by  provisions  following.  Subsidiary  and  minor  coins,  silver, 
nickel,  and  copper,  of  suitable  weight  and  value  to  be  provided. 

7.  Both  the  gold  and  silver  coins  to  be  receivable  to  par  in 
payment  of  all  obligations  due  to  the  Chinese  Imperial  Gov- 
ernment in  any  of  the  provinces.  When  such  obligations  have 
been  made  in  silver,  the  new  coins  may  be  tendered  instead  at 
their  coin  value. 

8.  The  Government  at  its  discretion,  in  conjunction  with  the 
viceroys,  from  time  to  time  to  declare,  by  proclamation,  in  the 
various  provinces  the  new  coins  legal  tender  for  debts  incurred 
after  a  date  fixed  in  the  proclamation.  Previous  debts  to  be 
paid  as  contracted. 

9.  For  the  maintenance  of  the  parity  of  the  silver  coins,  the 
Chinese  Government  to  open  credit  accounts  in  London  and 
other  leading  commercial  centres  against  which  is  may  draw 
gold  bills  at  a  fixed  rate,  somewhat  above  the  usual  banking 
rates.  For  example,  if  the  usual  banking  rate  on  London, 
under  the  system,  were  about  one  of  the  new  coins  for  2s., 
the  Government  might  sell  if  the  rate  rose  to  1.02  for  2s.  Such 
drafts  to  be  made  only  under  the  direction  of  the  controller 


347]  CURRENCY  REFORM  gy 

of  the  currency,  but  to  be  made  on  demand  for  all  depositors 
of  the  new  silver  coins  in  sums  of  not  less  than,  say,  10,000 
taels. 

10.  Should  it  be  necessary  to  make  a  loan  for  the  estab- 
lishment of  a  general  monetary  system  with  adequate  ex- 
change funds,  it  to  be  secured  by  sources  of  revenue  sufficient 
to  yield  an  amount  which  will  provide  for  the  needed  interest 
and  the  sinking  fund,  such  revenues  to  be  managed  in  a  way 
satisfactory  to  the  parties  interested. 

11.  The  seigniorage  profit  from  coinage  to  be  kept  as  a 
separate  fund.  Whenever  500,000  taels  worth  shall  have  been 
accumulated,  it  to  be  placed  as  a  gold  deposit  with  the  several 
foreign  depositories  in  proportion  to  drafts  made  upon  them. 
This  process  to  be  continued  till  at  least  .  .  .  taels  worth 
shall  be  in  the  gold  fund  on  deposit. 

12.  For  replenishing  the  gold  fund  after  its  reduction  by 
drafts,  the  controller  to  honor  silver  drafts  drawn  by  the  for- 
eign agents  of  the  treasury  in  exchange  for  gold,  at  rates  fixed 
by  the  controller. 

13.  Provision  to  be  made  for  a  banking  law  under  which 
bank  notes  kept  at  par  with  the  legal-tender  currency  may  be 
issued  by  an  imperial  bank  or  by  other  responsible  banks  under 
the  supervision  of  the  controller. 

14.  As  rapidly  as  is  practicable  the  new  currency  to  be  in- 
troduced into  the  various  provinces,  the  controller  making 
use  of  the  local  governments,  banks,  business  houses,  and 
such  other  agencies  as  are  best  suited  to  the  purpose. 

15.  Within  five  years  the  new  system  to  be  introduced  into 
all  the  treaty  ports,  and  as  far  as  possible  elsewhere,  and  all 
customs  duties  to  be  collected  in  terms  of  the  new  currency. 
Local  taxes  to  be  collected  in  the  new  currency  as  fast  as  it  is 
adopted  in  the  provinces,  and  provision  also  to  be  made  for 
the  keeping  of  the  tax  accounts  under  the  new  system. 

16.  The  new  system  to  be  put  into  effect  when  ...  of  the 
new  coins  are  ready  for  circulation. 

17.  The  controller  and  the  representatives  of  the  powers  to 
be  authorized  to  recommend  economic  reforms  to  the  Imperial 
Government. 


88  THE  CURRENCY  PROBLEM  IN  CHINA  [348 

The  American  Commissioner  argued  that,  if  the  national 
currency  were  first  introduced  on  the  silver  standard  and 
an  attempt  made  later  to  put  it  on  the  gold  basis,  the  result 
would  be  a  great  disturbance  of  business  for  a  period  of 
several  years.  There  would  be  the  necessity  of  raising  the 
gold  value  of  the  silver  coins  in  order  to  prevent  the  market 
fluctuations  from  affecting  the  fixed  gold  value  of  the  silver 
coins.  Should  this  be  done  rapidly,  the  banks  and  wealthy 
people  would  hoard  great  sums  of  money  in  order  to  secure 
higher  rates.  But  if  the  rate  were  raised  gradually,  bring- 
ing it  up  month  by  month,  there  would  be  a  period  of  un- 
settled business  conditions.  In  either  case  there  would  al- 
most surely  be  a  commercial  crisis. 

On  the  other  hand,  if  the  monetary  system  should  be  in- 
troduced on  the  gold  basis  at  the  beginning,  such  a  disturb- 
ance in  the  future  could  be  avoided.  Moreover,  there  were 
special  advantages  in  giving  the  currency  a  fixed  value  in 
gold  according  to  the  proposed  plan.  These  advantages 
were  pointed  out  in  the  pamphlet  called  Considerations  on 
a  New  Monetary  System  for  China,  as  follows : * 

I.  A  fixed  rate  of  exchange.  That  this  would  be  a  great 
benefit  was  shown  by  the  fact  that  in  1903  the  Shanghai 
tael  fluctuated  in  average  monthly  value  from  2s.  i^d.  in 
March  to  2s.  yd.  in  October,  a  variation  of  sY^d.  As  long 
as  these  fluctuations  affected  the  currency  they  would  al- 
ways seriously  embarrass  Government  finance  and  inter- 
national commerce.  It  was  further  shown  that,  by  elimi- 
nating the  element  of  risk  and  uncertainty  from  interna- 
tional commerce,  competition  of  merchants  would  become 
normal  and  prices  paid  for  foreign  goods  would  be  lessened. 
The  result  would  surely  be  a  great  increase  of  China's  for- 
eign trade.  The  case  of  Japan  was  cited  and  statistics  were 
produced  to  illustrate  this  last  point. 

1  Report,  cit.,  1904,  pp.  119-123. 


349]  CURRENCY  REFORM  89 

II.  Coinage  profit.  At  the  prices  of  silver  and  copper 
then  prevailing  it  was  estimated  that  China  could  expect  a 
profit  of  20  per  cent  on  the  coinage.  On  the  probable  out- 
put of  250  million  dollars  within  the  first  four  or  five  years 
China's  gain  would  amount  to  50  million  dollars.  This 
profit  could  be  made  a  part  of  the  gold  reserve. 

III.  Increase  of  investments.  Because  of  the  uncer- 
tainty with  regard  to  the  currency,  business  men  had 
hitherto  hesitated  to  invest  money  in  China  for  fear  of 
loss,  except  speculators  and  those  who  had  political  schemes 
to  further.  China  could  get  capital  to  develop  her  resources 
from  the  gold-standard  countries  at  very  low  rates  of  in- 
terest. This  would  be  one  of  the  decided  advantages  of 
adopting  the  gold  standard. 

IV.  Strengthened  credit.  Not  only  would  China  be  en- 
abled to  borrow  more  cheaply  but  it  was  also  quite  possible 
that  some  of  China's  foreign  debts  could  be  refunded  at 
lower  rates  of  interest.  Should  China  be  able  to  refund 
her  debts  which  bear  interest  above  4  per  cent  at  that  rate, 
it  would  affect  a  saving  of  3,136,400  taels  a  year  (the  tael 
taken  at  2s.  6d. ) .  This  saving  would  be  sufficient  to  pay  the 
interest  of  the  loan  for  gold-reserve  purposes. 

V.  Certainty  regarding  taxes.  The  gold  values  of 
China's  taxes  had  been  greatly  lessened  on  account  of  the 
decline  of  the  gold  value  of  silver.  This  fact  made  it  in- 
creasingly difficult  for  China  to  pay  off  her  debts.  The 
danger  of  foreign  aggression  would  be  very  great  should 
China  fail  to  meet  her  obligations.  Under  this  proposed 
system  there  would  be  no  further  depreciation  in  the  value 
of  the  taxes  collected. 

This  currency  system,  a  system  consisting  of  a  circula- 
tion within  the  country  of  a  token  silver  currency  of  un- 
limited legal-tender  quality  and  banknotes,  both  maintained 
at  par  with  gold  not  by  a  gold  currency  but  by  a  gold  re- 


go  THE  CURRENCY  PROBLEM  IN  CHINA  [350 

serve  kept  abroad,  is  known  as  the  gold-exchange  standard 
system.  It  differs  from  a  pure  silver  system  in  that  the 
silver  circulation  is  fixed  and  kept  at  par  with  gold.  It 
likewise  differs  from  bimetallism  in  that  it  does  not  aim  at 
establishing  a  fixity  of  value  of  silver  bullion  in  its  relation 
to  gold,  but  only  to  secure  such  fixity  as  regards  the  silver 
legal  tender  and  the  subsidiary  coins. 

The  same  system  as  was  recommended  to  China  by  the 
American  Commission  was  then  being  introduced  by  the 
United  States  into  the  Philippines,  by  Great  Britain  into 
the  Straits  Settlements,  by  France  into  Indo-China,  and  by 
Mexico  within  her  own  borders.  Before  we  consider  the 
circumstances  which  led  to  the  rejection  of  the  American 
plan,  the  history  and  development  of  this  system  may  be 
traced  with  advantage. 

The  gold-exchange  standard  was  first  used  in  the  Neth- 
erlands and  the  Dutch  East  Indies.1  Free  coinage  of  silver 
was  suspended  in  the  Netherlands  in  1873  in  consequence 
of  the  monetary  changes  in  Germany  and  the  countries  of 
the  Latin  Union,  1872-3.  For  some  time  the  Netherlands 
Government  waited  without  action.  A  special  commission 
appointed  to  investigate  the  situation  made  its  report  in 
1872,  declaring  that  "  it  would  be  impossible  for  Holland 
to  retain  the  silver  standard  were  all  her  neighbors  to  adopt 
gold  as  their  standard  of  value."  Meanwhile  the  suspen- 
sion of  coinage  brought  about  the  inevitable  result  that, 
while  the  gold  value  of  silver  bullion  was  continually  fall- 
ing, the  silver  coins  appreciated  as  compared  with  gold. 
Finally  in  1875  tne  g°ld  standard  was  adopted  at  a  ratio 
of  15.625  to  1  and  the  mint  was  opened  to  the  free  coinage 

1  Professor  Jenks  in  his  report  as  special  commissioner  of  the  War 
Department  (1902)  stated  that  the  Scotch  banks  made  use  of  this 
system  in  fixing  the  gold  value  of  Scotch  currency  in  the  absence  of 
a  gold  circulation  for  over  half  a  century.    See  Report,  cit.,  1903,  p.  450. 


35 1  ]  CURRENCY  REFORM  gL 

of  gold.  In  actual  practice  gold  coins  remained  in  the 
banks  as  reserves  and  the  circulation  consisted  of  silver 
florins  and  notes  issued  by  the  Netherlands  Bank  on  the 
gold  basis.  Neither  the  silver  florins  nor  the  notes  were 
legally  redeemable  in  gold,  though  the  Bank  never  failed  to 
give  gold  for  export  purposes. 

This  system  worked  well  till  1882.  In  the  month  of 
January,  1883,  the  balance  of  payment  having  turned 
against  the  Netherlands  steadily,  the  Bank's  stock  of  gold 
decreased  from  about  80,000,000/?.  to  less  than  5,000,000/?. 
It  is  evident  that  had  the  stock  of  gold  been  exhausted  the 
silver  florins  which  were  merely  token  coins  would  have 
became  a  depreciated  currency.  This  experience  led  the 
Government  to  take  precautionary  measures  and  the  statute 
of  April  27,  1884,  was  passed  empowering  the  Govern- 
ment in  case  of  necessity  to  authorize  the  Bank  to  sell  at  the 
market  price  silver  florins  to  the  amount  of  25,000,000, 
and  with  the  proceeds  to  buy  gold  for  replenishing  the  re- 
serve. The  statute  has  never  been  called  into  operation 
and  the  Bank's  gold  reserve  has  been  steadily  increased. 
Coinage  of  silver,  except  for  recoinage  and  minting  of  sub- 
sidiary pieces,  has  been  prohibited  by  law  ever  since  1873. 
For  when  the  free  coinage  of  silver  was  stopped  the  Neth- 
erlands had  a  stock  of  silver  coins  so  large  as  to  give  the 
Government  no  small  anxiety.  Now  the  possibility  of  coin- 
age of  more  silver  florins  is  again  being  considered.1  At 
the  ratio  of  15.625  to  1  such  coinage  evidently  would  yield 
very  high  profits. 

1  See  Report  of  the  Bank  of  Netherlands,  1913.  The  increase  of 
gold  coins  and  decrease  of  silver  florins  in  the  total  specie  stock  in  the 
Netherlands  Bank  and  Java  Bank  are  thus  shown:  1900,  /ioo,i64,ooo 
silver  and  subsidiary  coin,  /29,652,ooo  gold  coin;  1913,  /21,949,00c)  silver 
and  subsidiary  coin,  /73,7i7,ooo  gold  coin.  The  total  metallic  reserve 
on  March  31,  1913  was  /i7i,345,ooo  of  which  94.29%  was  of  gold  and 
only  5.71%  of  silver. 


92  THE  CURRENCY  PROBLEM  IN  CHINA  [352 

The  Dutch  East  Indies  adopted  the  gold  standard  in 
1877,  largely  through  the  efforts  of  Dr.  Van  Den  Berg, 
lately  President-Director  of  the  Netherlands  Bank.  The 
Dutch  gold  coin,  the  10-guilder  piece,  was  adopted  as  the 
standard  gold  coin.  The  silver  florins  circulating  in  Java 
were  declared  legal  tender  in  the  Netherlands.  The  silver 
florins  and  the  notes  issued  by  the  Bank  of  Java  have  been 
maintained  at  par  with  gold  through  exchange  upon  Am- 
sterdam. In  Sumatra  and  Borneo,  however,  the  criculation 
of  the  many  kinds  of  silver  dollars,  the  Mexican,  the  Straits 
dollar  etc.,  continued,  though  of  course  no  effort  was  made 
to  keep  these  coins  at  par  with  gold.  Hence  the  silver 
standard  was  actually  in  force  in  these  places  and  even 
notes  issued  by  private  banks  on  the  silver  standard  were 
enjoying  a  circulation  unhindered.  The  gold-standard  sys- 
tem with  notes  of  the  Java  Bank  on  the  gold  standard  ex- 
isted side  by  side  with  the  silver  circulation.  The  Govern- 
ment transacted  business  on  the  gold  basis  but  was  willing 
to  accept  and  even  to  make  payments  in  silver  at  a  rate 
slightly  lower  than  the  market  rate  of  the  day  in  order  to 
demonstrate  the  superior  stability  of  the  gold  standard. 
These  two  standards  existed  until  1907-8  when  the  use  of 
foreign  silver  coins  was  abolished.  These  experiences  have 
some  peculiar  bearing  on  the  problem  of  reform  in  China 
to  which  we  shall  return  in  the  closing  chapter.1 

In  the  successful  maintenance  of  the  gold  standard  in  the 
Netherlands  and  particularly  in  the  Dutch  East  Indies, 
sometimes  in  the  face  of  fluctuations  of  more  than  50  per 
cent  in  the  gold  value  of  silver,  were  laid  the  foundations! 
of  the  gold-exchange  standard  system.  The  next  country 
to  adopt  it  was  British  India  in  1893-99,  though  by  a  very 
different  process.     British  India,  June  26,  1893,  closed  the 

1  Dr.  G.  Vissering,  On  Chinese  Currency,  1912,  pp.  3J-32. 


353]  CURRENCY  REFORM  93 

mints  to  the  free  coinage  of  silver,  the  Government  retain- 
ing the  right  to  coin  rupees  on  its  own  account.  Rupees 
were  made  obtainable  at  the  mints  in  exchange  for  gold 
coins  or  bullion  at  the  rate  of  i6d.  per  rupee  or  15  rupees 
to  the  pound.  Public  dues  were  made  receivable  in  gold  at 
the  same  rate.  This  action,  intended  to  prevent  the  gold 
value  of  the  rupee  from  a  further  decline,  was  taken  on 
recommendation  of  the  Indian  Currency  Commitee,  com- 
monly known  as  the  Herschell  Committee.1  The  financial 
difficulties  of  the  Indian  Government  which  largely  were 
responsible  for  this  currency  reform  have  already  been 
dwelt  upon. 2  No  definite  action  was  taken  to  give  India  a 
fixed  monetary  standard  until  1898.  Embarrassed  by  the 
constant  though  slight  fluctuations  in  the  gold  value  of 
rupees,  the  Indian  Government  had  repeatedly  urged  that 
steps  be  taken  to  secure  the  early  establishment  of  a  gold 
standard.  The  closing  of  the  mints  had  not  only  prevented 
the  rupee  from  a  further  depreciation,  but  had  gradually 
raised  its  gold  value  until  in  1898  it  fluctuated  about  the 
fixed  exchange  ratio  of  i6d.  per  rupee.  An  Indian  Cur- 
rency Committee,  known  as  Sir  Henry  Fowler's  Committee, 
was  appointed  and  reported  unanimously  for  the  adoption 
of  the  gold  standard  in  India.3  By  an  act  of  the  Indian 
Government,  September  15,  1899,  the  sovereign  was  ac- 
cordingly declared  a  legal-tender  coin  in  India  while  the 
rupee  and  the  half -rupee  remained  unlimited  legal  tender, 
at  the  rate  of  15  rupees  to  the  pound.  The  committee  also 
.recommended  that  the  mints  be  opened  to  the  free  coinage 
of  gold,  but  this  particular  recommendation  has  not  yet 

1  East  India  Accounts  and  Papers,  Report  of  Indian  Currency  Com- 
mittee, vol.  xvi,  1893-4. 

2  See  supra,  pp.  65-6. 

8  Parliament  Reports  from  Commissioners,  etc.,  Report  of  the  Indian 
Currency  Committee,  vol.  xxi,  1899. 


94  THE  CURRENCY  PROBLEM  IN  CHINA  [354 

been  given  effect.  The  gold  reserve,  the  accumulation  of 
which  began  in  1893,  nas  Deen  used  to  maintain  the  parity 
of  the  silver  currency.  Increased  by  profits  upon  the  silver 
coinage  as  well  as  by  the  exchange  of  currency  notes  not  only 
silver  bullion  but  also  for  gold  coin  and  bullion,  these  re- 
serves have  grown  into  an  enormous  sum.1  The  practice  of 
giving  rupees  for  gold  has  been  continued.  The  reserves 
have  always  been  available  for  foreign  remittances,  though 
the  Indian  Government  does  not  bind  itself  to  give  gold  for 
rupees.  The  policy  of  closing  the  mints  to  the  free  coin- 
age of  silver  and  of  adopting  the  gold  standard  did  not 
escape  criticism,  but  the  success  of  the  Indian  Government 
in  giving  the  currency  a  stable  value  in  gold  cannot  be  ques- 
tioned. The  success,  moreover,  helped  further  to  dispel 
whatever  doubts  there  had  been  concerning  the  practica- 
bility of  the  gold-exchange  standard  system. 

These  experiences  of  the  Netherlands  and  of  India  have 
shown  that  it  is  quite  possible  to  introduce  a  gold  standard 
without  introducing  an  extensive  gold  circulation,  and  that 
a  token  silver  currency  with  unlimited  legal-tender  quality 
can  be  maintained  as  the  general  medium  of  exchange  and 
kept  at  par  with  gold  through  a  gold  reserve.  Hence,  at 
the  time  when  reforms  in  the  currency  of  the  silver-standard 
countries  were  contemplated  after  the  opening  of  the  new 
century,  the  gold-exchange  standard  was  widely  adopted 
as  a  scientific  currency  system.     The  plan  recommended  to 

1  The  Indian  Government  keeps  two  separate  reserves,  the  Gold 
Standard  Reserve  which  is  kept  in  London  and  the  paper-currency 
reserve  kept  in  India.  The  total  amounted  on  March  31,  1913  to 
£68,000,000  of  which  £27,000,000  was  held  in  gold,  £15,000,000  in  rupees, 
and  £26,000,000  in  securities.  Of  this  total  ill  million  was  held  in 
England  and  £41  million  in  India.  This  large  sum  is  held  (1)  against 
a  possible  demand  for  cash  in  lieu  of  the  paper  currency  notes  and 
(2)  to  maintain  the  exchange  value  of  the  rupee.  The  Asiatic  Review, 
vol.  iii,  no.  5.  PP-  94~5,  Jan.,  1914. 


355]  CURRENCY  REFORM  95 

China  represents  the  latest  stage  in  the  evolutionary  de- 
velopment of  this  system.  As  has  been  said,  the  United 
States  Government  introduced  a  similar  plan  into  the  Phil- 
ippines, in  1903.  The  gold  peso,  consisting  of  twelve  and 
nine-tenths  grains  of  gold  900  fine,  was  adopted  as  the  unit 
of  value  by  the  Philippine  coinage  act  of  March  2,  1903; 
and  a  silver  peso  416  grains,  900  fine,  at  the  ratio  of  31  to  1, 
was  struck  as  the  representative  of  the  gold  unit  in  circula- 
tion with  unlimited  legal-tender  quality.  Silver  certificates 
were  issued  against  the  standard  coins  held  as  security.  A 
gold-reserve  fund  was  created  and  kept  in  New  York  for 
the  purpose  of  maintaining  the  parity  of  the  silver  coins 
with  the  gold  standard.1  The  working  of  this  system  has 
already  been  described.  The  reform  in  the  Philippines  was 
completed,  and  the  new  system  based  on  the  gold  standard 
was  established  within  the  short  period  of  seventeen 
months. 

In  the  light  of  historical  evidence  and  contemporary  ex- 
perience, then,  there  is  no  doubt  that  the  plan  proposed  to 
the  Chinese  Imperial  Government  by  the  United  States 
Commissioner  is  theoretically  sound  and  perfectly  prac- 
ticable. Nor  is  there  any  doubt  that  it  is  likewise  superior 
to  the  alternative  procedure  of  introducing  the  national  cur- 
rency on  the  silver  basis  and  later  raising  its  gold  value  in 
the  manner  by  which  British  India  adopted  her  gold 
standard. 

The  difficulty  of  the  Chinese  Government's  position  was 
that  economic  conditions  within  its  country  spoke  strongly 
in  favor  of  the  silver  standard,  while  international  condi- 
tions, both  fiscal  and  commercial,  demanded  the  gold  stand- 

1  The  Indian  banker  A.  M.  Lindsay  proposed  to  the  Currency  Com- 
mittee of  1898  a  plan  called  "  a  gold  standard  without  a  gold  currency  " 
which  was  not  adopted  in  India.  It  bears  close  resemblance  to  the 
purest  form  of  the  exchange  standard.    Rep.,  1903,  p.  449. 


96       THE  CURRENCY  PROBLEM  IN  CHINA  [356 

ard.  The  adoption  of  the  gold  standard  seemed  all  the  more 
urgent  because  by  1904  China  was  the  only  silver-standard 
country  in  the  world.  But  a  pure  gold-standard  system  was 
clearly  impracticable,  since  it  was  generally  admitted  that 
China  had  not  the  necessary  supply  of  gold  for  the  coinage 
of  gold  money.  Looking  at  the  problem  in  this  light  the 
proposed  plan  offered  the  best  solution  of  the  currency  prob- 
lem. The  difficulties  of  introducing  and  maintaining  this 
system  must  not  however  be  overlooked  and  to  these  we 
may  now  turn  our  attention. 

The  most  serious  difficulty  in  establishing  a  system  of  cur- 
rency of  this  nature  in  China  arises  from  the  use  of  token 
coins.  Whether  this  difficulty  would  be  really  insurmount- 
able and  would  defeat  the  system  was  a  point  on  which  ex- 
pert opinion  differed  decidedly;  and,  as  the  plan  was  not  then 
accepted  and  put  into  operation,  it  still  remains  a  matter  of 
oipnion  and  conjecture.1  The  circulation  of  token  coins  is 
a  necessary  feature  of  this  species  of  gold  standard.  The 
reason  is  not  difficult  to  find.  To  secure  a  fixed  exchange 
value  in  gold  for  the  silver  currency  the  coinage  ratio  has 
to  be  higher  than  the  market  ratio,  in  order  to  eliminate  the 
influence  of  exchange  fluctuations  on  the  gold  value  of 
silver  coins  and  to  permit  a  certain  increase  in  the  gold  price 
of  silver  bullion  without  deranging  the  system.  The  Ameri- 
can Commission  proposed  the  ratio  of  32  to  1  which  was 
then  nearly  20  per  cent  higher  than  the  market  ratio.  This 
was  considered  by  experts  a  sufficiently  wide  margin.  Sub- 
sequent events  have  shown  that  even  this  ratio  was  too 
low  and  those  countries  that  had  adopted  the  same  ratio,  the 
Philippines,  the  Straits  Settlements,  Mexico,  etc.,  had  either 
to  re-arrange  their  system  or  change  to  a  much  higher  ratio. 
The  serious  consequences  of  adopting  a  ratio  either  too  high 

1  The  British   Commission,  for  instance,  regarded  the  plan  as  un- 
workable on  this  ground.    See  Report,  cit.,  1904,  p.  33. 


357]  CURRENCY  REFORM  gy 

or  too  low  were  stated  by  the  American  Commission  in  the 
following  language : 1 

There  are  certain  risks  in  adopting  a  silver  coin  of  a  weight 
very  much  less  than  its  bullion  value,  and  there  are  risks  of 
an  opposite  character  in  adopting  a  coin  of  a  weight  conform- 
ing too  closely  to  the  market  value  of  the  bullion  which  it 
contains.  The  dangers  in  the  first  case  are  much  less  serious 
than  in  the  second.  If  too  high  a  value  is  put  upon  the  silver 
bullion  in  the  coin, — that  is,  if  the  coin  contains  very  much 
less  silver  than  it  purports  to  represent  in  face  value, — then 
there  will  be  a  wide  range  of  difference  between  the  gold  value 
of  the  coin  as  coin  and  as  bullion.  This  is  the  case  at  present 
with  the  coins  of  the  United  States,  issued  at  the  ratio  of  16 
to  i ;  with  those  of  the  countries  of  the  Latin  Union,  issued 
at  the  ratio  of  15^  to  I,  and  with  those  of  Russia  and  British 
India,  issued  at  the  ratio  of  about  24  to  1. 

The  two  chief  dangers  in  such  a  system  are  the  private  coin- 
age of  pieces  of  full  weight  and  the  strain  upon  national 
credit  required  to  maintain  the  legal  coins  at  their  full  value, 
since  business  confidence  is  an  important  factor.  The  first 
danger  is  not  one  which  the  advanced  civilized  countries  have 
thus  far  found  a  serious  menace  to  their  monetary  systems. 
The  second  danger  has  sometimes  threatened  them  when,  as 
in  the  case  of  the  United  States,  the  coinage  was  permitted 
to  become  too  large.  This  danger  would  be  much  graver 
in  the  case  of  a  country  whose  currency  consisted  chiefly  of 
silver  coins,  without  a  gold  circulation,  and  especially  in  one 
whose  financial  standing  was  not  high.  It  seems  to  be  desir- 
able, therefore,  in  countries  whose  police  system  is  not  thor- 
oughly organized  to  prevent  and  detect  counterfeiting  and 
whose  credit  is  not  of  the  highest  order,  to  depart  from  the 
ratio  of  European  countries  and  the  United  States  and  to 
choose  a  ratio  more  closely  approximating  the  bullion  value  of 
the  coins. 

1  Report,  cit.,  1903,  pp.  26-27. 


98  THE  CURRENCY  PROBLEM  IN  CHINA  [358 

It  remains  to  deal  with  the  opposite  type  of  risk  involved 
in  the  choice  of  a  ratio  giving  too  low  a  value  to  silver.  This 
risk  consists  in  the  fact  that  under  such  a  system  a  slight  rise 
in  the  price  of  silver  might  derange  the  entire  monetary  cir- 
culation by  making  it  more  profitable  to  export  the  standard 
coins  as  bullion  than  to  employ  them  as  coins.  If,  for  ex- 
ample, the  Government  of  Great  Britain,  when  the  subject  of 
giving  stability  to  the  currency  of  the  Straits  Settlements  was 
first  discussed  last  December,  had  seen  fit  to  adopt  a  ratio  cor- 
responding to  the  price  of  silver  at  that  time  it  would  have 
adopted  a  ratio  of  about  40  to  1.  This  ratio  would  have  given 
to  the  British  dollar  a  value  of  about  40  cents  in  the  gold  cur- 
rency of  the  United  States.  The  rise  in  the  price  of  silver 
which  occurred  in  April  last  would  have  raised  the  market 
ratio  between  the  metals  to  about  36  to  1  and  would  have 
raised  the  value  of  the  silver  bullion  contained  in  the  British 
dollar  to  about  45  cents.  It  is  clear  that  the  holder  of  one  of 
these  coins,  if  he  had  found  its  gold  value  in  the  Straits  Set- 
tlements to  be  only  40  cents  and  its  value  as  silver  bullion  at 
Hongkong  or  in  London  to  be  45  cents,  would  have  gathered 
up  every  such  piece  within  his  reach  and  sent  it  to  the  market 
where  it  could  be  sold  as  bullion  at  the  higher  price.  The  re- 
sult, if  such  conditions  had  continued  for  any  appreciable 
time,  would  have  been  to  deprive  the  Straits  Settlements  of 
their  currency  and  to  bring  great  derangements  into  businss 
transactions. 

In  adopting  the  proposed  system  with  its  circulation  of 
token  coins  the  question  would  be,  Would  the  Government 
be  powerful  and  efficient  enough  to  prevent  counterfeiting 
from  destroying  the  whole  system  ?  For,  what  was  a  source 
of  profit  to  the  Government  would  be  equally  an  inducement 
to  individuals  for  counterfeiting.  Moreover,  since  the 
silver  coins  under  this  system  would  have  a  fixed  value  in 
gold  they  would  necessarily  have  a  fluctuating  value  with 
reference  to  the  silver  tael  and  the  copper  currency.     These 


359]  CURRENCY  REFORM  gg 

latter  fluctuations  would  make  the  change  from  the  old 
copper  and  silver  basis  to  the  new  gold  basis  exceedingly 
difficult,  even  if  the  Government  were  powerful  and  the 
system  intelligently  managed.  Of  course,  the  danger  of 
counterfeiting  is  unavoidable  in  other  countries  where  token 
coins  are  in  circulation;  but  it  was  claimed,  and  this  must 
be  admitted  as  quite  true,,  that  the  danger  was  especially 
great  in  China  because  of  the  enormous  extent  of  territory 
and  the  looseness  of  the  political  system.  Moreover,  the 
leased  territories  could  easily  be  made  use  of  as  a  basis  for 
counterfeiting  operations  if  the  Government  should  suc- 
cessfully prevent  them  in  Chinese  territory.  Another  point 
that  was  urged  against  this  system  was  that,  unlike  these 
other  countries  most  of  which  were  colonies,  with  a  mother 
country  always  ready  to  come  to  the  rescue  in  case  the  sys- 
tem should  be  threatened  with  collapse,  China  must  rely 
upon  herself  for  its  successful  maintenance. 

However,  these  doubts  were  not  primarily  respon- 
sible for  the  rejection  of  this  plan.  What  was  re- 
garded as  the  greatest  obstacle  was  the  necessity  of 
employing  foreigners  to  administer  it.  This  was  pro- 
vided for  in  the  American  plan,  and  all  fair-minded 
persons  must  admit  that  had  China  then  adopted  this  par- 
ticular system  she  would  have  had  to  depend  upon  foreign 
assistance,  as  she  had  not  men  with  the  necessary  knowl- 
edge and  experience  to  manage  it.  The  system  would  not 
work  automatically.  It  required  skillful  management,  es- 
pecially in  the  maintenance  of  the  gold  reserve..  The  dan- 
ger point  of  the  gold-exchange  standard  system  rests  here.1 

1  The  Netherlands  Commission,  speaking  of  the  dangers  that  might 
be  incurred  in  establishing  a  system  of  this  kind  in  China,  says: 
"  Without  magnifying  them  unduly,  we  ought  to  beware  of  belittling 
them,  and  our  own  experience  has  taught  us  that  they  are  consider- 
able.   A  system,  if  so  it  may  be  called,  like  the  one  now  about  30 


IOo  THE  CURRENCY  PROBLEM  IN  CHINA  [360 

On  the  other  hand,  any  attempt  that  looked  like  foreign  in- 
terference in  the  finances  of  the  country  could  not  but  be 
regarded  with  suspicion.  This  was  not  unnatural  when  it 
is  remembered  that  the  unsettled  political  conditions  (the 
Russo-Japanese  war  was  then  in  progress)  and  the  weak- 
ened government  finances  created  among  the  minds  of  the 
people  a  feeling  of  anxiety.  What  made  the  adoption  of 
this  plan  immediately  impossible  was  the  opposition  of 
Chang  Chih-tung. 

Chang  Chih-tung's  memorial,1  opposing  the  adoption  of 
the  gold-standard  plan,  reached  Peking  shortly  after  the 
American  Commissioner,  Professor  Jenks,  had  left  it.  The 
Viceroy  Chang  was  then  in  a  position  of  great  influence. 
Aside  from  the  fact  that  he  was  Viceroy  of  the  two  im- 
portant Provinces  of  Hupei  and  Hunan,  he  had  had  a  vice- 
regal career  of  more  than  a  quarter  of  a  century,  and  was  the 
recognized  leader  of  the  literati.  Furthermore  he  had  been 
a  pioneer  in  the  currency-reform  movement  and  was  re- 
sponsible for  the  establishment  of  the  first  mint  at  Canton 
in  1887.  His  words,  therefore,  carried  great  weight  and 
his  memorial  may  be  reasonably  taken  as  voicing  the  official 
opinion  of  the  time.  In  the  following  pages  we  shall  at- 
tempt to  analyze  this  memorial  in  some  detail. 

It  is  interesting  to  note  at  the  outset  in  what  light  he  re- 
garded the  mission  of  Professor  Jenks.  He  was  one  of 
the  few  who  knew  of  the  invitation  to  the  United  States 
Government  for  the  international  inquiry  into  the  silver 
question,  but  the  invitation  was  understood  by  him  as  an 

years  in  operation  in  our  country  and  its  colonies,  does  not  work  well 
automatically.  That  is  the  weak  part  of  it.  It  requires  constant 
supervision  and  in  the  first  place  intelligent  co-operation  between  the 
bank  (or  the  banks  where  there  are  many)  and  the  Government.  On 
this  point  too  much  stress  cannot  be  laid."  Report,  cit.,  1003,  p.  151. 
1  Emp.  K.  H.,  State  Papers,  Year  30,  pp.  23-27. 


361]  CURRENCY  REFORM  IOi 

attempt  topping  chin  chia  or  "  to  steady  the  price  of  gold." 
To  him  the  American  Commissioner  was  the  United  States 
delegate  to  China  to  yi  chin  chia,  that  is,  "  to  confer  on  the 
price  of  silver."  x  The  attempt  "to  steady  the  price  of  gold" 
was  not  so  much  a  currency  as  a  fiscal  measure ;  for  he  stated 
in  another  part  of  the  memorial  that  it  had  been  intended 
as  a  "  plan  to  make  provision  for  meeting  the  indemnity 
remittances/' 

These  few  remarks  not  only  show  his  attitude  towards 
the  mission  of  the  American  representative  but  also  reveal 
the  very  significant  fact  that  what  was  then  in  the  gold- 
standard  countries  regarded  as  depreciation  of  silver  was 
in  the  silver  country  considered  as  appreciation  of  gold.  To 
put  it  differently,  the  popular  idea  in  a  gold  country  is  that 
the  value  of  silver  fluctuates;  while  in  a  silver  country,  the 
popular  idea  is  that  gold  fluctuates. 

The  memorial  covers  the  following  principal  points :  ( 1 ) 
the  inadvisability  of  employing  a  foreign  controller;  (2)  the 
impracticability  of  the  gold-standard  system;  (3)  the  bene- 
fits of  adopting  the  silver  standard  for  the  new  uniform 
coinage. 

Objections  to  the  employment  of  a  foreigner  as  con- 
troller were  made  on  the  ground  of  national  interest  and 
were  based  on  articles  2,  3,  4,  13  and  17  of  the  proposed 
plan.  Thus  he  argued :  "  The  finances  of  a  nation  consti- 
tute its  life  and  no  Government,  be  it  weak  or  strong,  pro- 
vided that  it  is  independent,  ever  permits  its  finances  to  be 
controlled  by  foreigners  or  allows  foreign  meddling."  On 
this  point  nobody  is  inclined  to  differ  from  him.  However, 
he  most  certainly  misunderstood  the  purpose  of  those  pro- 
visions and  the  cause  of  this  misunderstanding  lay  in  his 

1  In  justice  to  Chang  Chih-tung  it  should  be  said  that  his  misunder- 
standings were  partly  due  to  the  faulty  Chinese  version  of  Prof. 
Jenks's  pamphlets. 


I02  THE  CURRENCY  PROBLEM  IN  CHINA  [362 

imperfect  knowledge  of  the  whole  plan  of  which  the  ar- 
ticles referred  to  formed  a  part. 

His  criticisms  of  the  proposed  plan  are  found  in  several 
passages.  Thus,  in  describing  the  operation  of  the  Ameri- 
can scheme,  he  said : 

What  your  minister  cannot  understand  further  is  that  in  the 
proposed  new  silver  coinage  a  gold  price  of  32  to  1  is  arbitra- 
rily fixed,  alleging  that  profits  amounting  to  about  20  per  cent 
would  thereby  accrue  to  the  Government  in  the  form  of  sei- 
gniorage.   ... 

If  the  gold  price  of  32  to  1  as  fixed  could  be  made  to  pre- 
vail both  in  and  outside  China,  and  if  likewise  China  could 
reckon  at  that  rate  in  remitting  foreign  indemnities  [payable 
in  silver]  then  it  would  surely  be  a  proposition  that  is  fair  to 
all  parties.  But,  according  to  what  the  said  Commissioner  has 
decided,  the  regulations  concerning  these  silver  coins  minted 
at  the  ratio  of  32  to  1  could  apply  only  in  places  within  the 
confines  of  the  Chinese  Empire ;  and  in  buying  drafts  or  pur- 
chasing gold  from  abroad  the  value  of  the  coins  must  depend 
upon  the  decision  of  the  controller,  who  would  accept  the  rate 
current  on  the  day  when  the  actual  purchases  were  made.  In 
the  submitted  Memoranda  it  was  expressly  stated  that  these 
silver  coins  are  to  pass  at  the  ratio  of  32  to  1  in  China,  but  if 
payments  abroad  are  made  with  these  coins  they  must  be 
valued  according  to  their  bullion  contents,  that  is,  at  the  ratio 
of  about  40  to  1.  This  regulation  would  therefore  compel  the 
Chinese  people  to  pay  over  to  the  Government  a  tael  gold, 
worth  40  taels  silver,  as  the  equivalent  of  32  taels  silver,  while 
foreigners  upon  entering  Chinese  territory  could  with  32  taels 
silver  get  the  equivalent  purchasing  power  of  one  tael  gold. 
Even  with  Chinese  silver  to  buy  drafts  or  to  pay  for  foreign 
gold,  it  would  be  necessary  to  give  40  taels  silver  in  order  to 
secure  one  tael  gold. 

Had  Chang  understood  that  in  international  relations 
the  coins  are  and  must  always  be  taken  at  their  bullion  valuei 


363]  CURRENCY  REFORM  103 

and  could  he  have  recognized  the  distinction  between  the 
silver  coin  and  the  silver  bullion,  he  probably  would  never 
have  made  such  contentions  and  arrived  at  such  conclusions. 
What  was  actually  proposed  was  to  give  fixity  of  value  to 
the  silver  coins  as  compared  with  gold,  and  not  to  fix  the 
gold  price  of  silver  bullion,  or  the  silver  price  of  gold, 
which  is  something  that  no  Government  had  ever  suc- 
ceeded in  accomplishing. 

From  the  above  conclusions  he  proceeded  to  set  forth  the 
dangers  and  disturbances  that  would  follow.  He  con- 
tended that  the  merchants  and  the  people  would  not  accept 
this  system,  and  were  this  system  put  into  operation  arbi- 
trarily, both  the  Government  and  the  people  would  suffer 
great  loss.  Gold  in  the  arts  and  gold  products  of  the  mines 
would  be  exported  if  the  Government  should  decide  to 
"  buy  gold  at  such  a  low  price  ".    Further  on  he  argued : 

If  the  silver  coins  were  given  a  token  value,  and  if  in  the  dis- 
bursements of  the  Government  32  taels  in  silver  were  made 
worth  one  tael  gold  (worth  40  taels  of  silver  in  the  market), 
then  the  people  and  merchants  would  certainly  advance  the 
prices  of  their  goods  and  their  wage-claims  from  the  rate  of 
32  taels  to  the  rate  of  40  (that  is,  an  increase  of  20  per  cent). 

But  what  he  regarded  as  "  still  more  tyrannical  and  un- 
sound "  was  the  provision  in  the  proposed  plan,  requiring 
creditors  to  accept  the  new  coins  in  the  payment  of  old 
debts ;  and  he  predicted  that,  as  soon  as  this  order  was  put 
into  force,  there  would  be  a  total  destruction  of  credit  and 
stoppage  of  borrowing  and  lending  followed  by  impover- 
ishment of  the  people  and  great  popular  upheavals. 

Enough  of  Chang's  protest  against  the  proposed  sys- 
tem has  been  quoted  to  give  an  idea  of  his  views  and  of  the 
grounds  of  his  objections.  We  may  now  look  for  the  causes 
of  his  errors. 


IQ4  THE  CURRENCY  PROBLEM  IN  CHINA  [364 

His  conception  of  the  coinage  ratio.  Theoretically,  there  is 
no  reason  to  suppose  that  the  proposed  ratio  of  32  to  1  was 
the  only  one  China  could  adopt.  China  could  choose  any 
ratio  she  pleased,  the  American  coinage  ratio,  the  French 
ratio,  the  ratio  of  the  yen  or  the  rupee.  The  gold  value  of 
the  coins  bearing  a  token  character  does  not  depend  upon 
the  ratio  or  the  intrinsic  value  of  the  coins,  but  primarily 
upon  their  redeemability  in  the  standard.  Practically,  the 
selection  of  a  suitable  ratio  for  the  silver  in  the  coinage  is 
a  most  difficult  problem.  In  making  this  choice,  both  the 
ability  of  the  Government  to  maintain  the  par  value  of  the 
token  coins  and  the  possible  fluctuations  of  the  bullion  in 
either  direction,  have  to  be  considered.  These  principles 
have  already  been  explained  and  need  not  be  repeated.  The 
proposed  ratio,  then,  was  one  of  weight  between  the  new 
silver  coin  and  the  gold-standard  unit.  It  must  not  be  taken 
to  mean  that  the  value  of  silver  bullion  in  relation  to  gold 
was  expected  to  be  fixed  at  that  ratio — which  would  be  a 
fantastic  return  to  bimetallism,  already  given  up  by  all 
modern  nations  as  impracticable.  To  adopt  a  fixed  ratio 
between  silver  coins  and  gold  is  quite  a  different  matter 
and,  as  shown  by  the  experience  of  many  nations,  is  quite 
possible.  The  failure  to  understand  the  principle  involved 
on  the  part  of  the  Viceroy  was  due  not  only  to  unfamiliarity 
with  facts,  but  also  to  his  confusion  of  the  com  with  the 
bullion — a  confusion  shared  by  most  of  his  people  because 
of  the  habit  of  using  silver  bullion  by  weight  as  currency « 
That  this  was  the  case  may  be  seen  from  his  frequent  allu- 
sions to  the  alleged  unfairness  of  the  Government's  giving 
32  taels  silver  for  one  tael  gold,  forgetting  that  what  the 
Government  gave  would  not  be  so  much  bullion  but  coins 
with  a  fixed  value  in  the  new  standard  of  value — gold. 

The  grounds  of  his  apprehensions.  Much  was  made  of 
the  alleged  injustice  to  the  merchants  and  people.     He  did 


365]  CURRENCY  REFORM  105 

not  seem  to  have  a  clear  notion  that  the  Government  was 
not  only  to  issue  these  coins  but  must  also  everywhere  re- 
ceive them  at  their  coin  value.  The  American  Commis- 
sioner explained  elaborately  in  his  currency  pamphlet  that 
the  Government  could  not  by  a  mere  edict  make  the  silver 
coins  really  worth  20  per  cent  more  than  their  intrinsic 
value,  but  that  it  could  adopt  measures  such  that  people 
would  not  hesitate  to  accept  silver  coins  at  that  value.  We 
may  quote  his  demonstration  in  full : x 

A  silver  dollar  which  weighs  seventy-two  hundredths  of  a 
tael  is  worth  in  China  at  this  date  in  American  gold  about  48 
cents.  If  that  same  dollar  or  an  equal  weight  of  silver  could 
be  given  by  action  of  the  Government  a  value  of  55  cents 
American  gold,  it  would  be  worth  about  eighty-two  hundredths 
of  a  tael.  The  Government  can  not,  by  mere  decree,  make 
seventy-two  hundredths  of  a  tael  worth  eighty-two  hundredths 
of  a  tael,  but  it  can  take  other  measures  so  that  all  merchants 
will  readily  accept  it  at  that  value.  Exactly  that  kind  of  re- 
sult is  secured  by  all  the  civilized  countries  except  China. 

The  following  passages  indicate  the  method  of  attaining  this 
result : 

If  the  Chinese  Government  takes  seventy-two  hundredths 
of  a  tael  of  silver  bullion,  coins  it,  and  calls  the  coin  the  "  im- 
perial coinage  dollar,"  it  will  be  different  in  looks  from  any 
other  dollar  now  in  circulation.  Let  it  pay  this  new  coin  to  an 
official  for  82  tael-cents ;  that  is,  if  it  owes  him  8.20  taels,  let 
the  Government  pay  him  10  of  the  new  dollars  instead  of 
$11.38  of  the  present  dollars  at  the  equivalent  of  8.20  taels. 
The  official  will  readily  take  the  new  dollars,  at  the  rate  of  82 
tael-cents,  under  the  following  conditions: 

1.  The  Government  agrees  always  to  take  the  new  dollars 
anywhere  in  the  Empire — Peking,  Shanghai,  in  Szechuan, 
Honan,  or  elsewhere,  instead  of  82  tael-cents  due  in  taxes  or 
contributions  or  in  any  other  debt  due  the  Government.     If 

1  Report,  cit.,  1904,  pp.  130-131. 


I06  THE  CURRENCY  PROBLEM  IN  CHINA  [366 

the  official  can  pay  it  to  the  Government  for  82  tael-cents  and 
the  Government  will  surely  receive  it  at  that  rate,  he  will  not 
object  to  taking  it. 

2.  The  Government  should  pass  a  decree  in  due  time,  after 
the  people  understand  the  plans  of  the  Government,  saying 
that  anyone  who  has  a  debt  to  pay  to  any  other  person  may 
pay  it  in  the  new  dollars  at  the  rate  of  one  dollar  for  82  tael- 
cents.  If  the  people  know  that  the  Government  will  always 
back  them  in  paying  their  debts  with  the  dollar  at  82  tael-cents, 
they  will  not  object  to  taking  it  at  that  rate. 

3.  If  the  Government  says,  further,  that  it  will  take  these 
new  dollars  and  give  in  exchange  for  them  an  order  to  pay  in 
London  or  New  York  or  Yokohoma  82  tael-cent's  worth  of 
gold  for  each  new  dollar  paid  into  its  bank,  all  the  foreign 
banks  will  receive  them  at  that  value,  for  they  are  buying 
orders  on  those  places  every  day.  If  the  foreign  banks  take 
them  at  that  rate,  all  native  banks  and  merchants  will  take 
them  at  the  same  rate,  for  they  can  be  sure  of  paying  them 
out  at  that.  If  the  Government  takes  them  at  82  tael-cents, 
all  the  people  will  do  so,  for  they  will  know  that  they  may  pay 
them  out  at  the  same  rate. 

4.  The  Government,  too,  having  full  control  over  the  mints, 
will  not  coin  more  of  these  coins  than  the  needs  of  business 
demand,  so  that  the  people  will  always  be  using  all  that  are  in 
circulation,  and  this  will  also  keep  up  the  value. 

By  following  these  methods  the  Government  could  without 
cost  to  itself  gain  a  profit  of  10  tael-cents  on  each  new  dollar 
coined.  It  would  be  practically  as  easy  by  the  same  methods 
to  make  a  profit  of  12  or  15  cents,  and  it  would  probably  be 
best  to  make  the  gain  about  20  per  cent.  It  should  be  noted 
that  this  profit  can  be  made  on  each  piece  only  once,  and  that 
is  when  it  is  first  coined  and  put  into  circulation.  After  that 
the  dollar  must  be  taken  in  by  the  Government  at  the  same 
value  at  which  it  is  paid  out,  so  that  there  is  no  profit. 

As  48  cents  gold  equals  about  72  tael-cents  and  55  cents 
gold  equals  about  82  tael-cents,  it  is  shown  above  how  a  48- 
cent  dollar  can  be  made  to  pass  for  55  cents. 


367]  CURRENCY  REFORM  XOy 

There  is  one  point  of  great  importance  which  must  not 
be  overlooked  in  this  connection,  namely,  the  consequences 
of  demonetizing  the  silver  long  in  use.  Of  course  it  was 
not  recommended  that  this  be  done  suddenly.  Some  years 
were  allowed  for  introducing  this  system  over  the  entire 
area  of  the  country,  and  it  was  suggested  that  the  Govern- 
ment begin  in  the  principal  commercial  cities,  or  in  one 
Province  and  then  gradually  extend  it.  As  has  been  said, 
the  crucial  difficulty  in  adopting  the  new  basis  of  calculations 
lies  here:  the  coins  issued  in  terms  of  gold  would  thence- 
forward have  a  fixed  gold  value,  but  a  fluctuating  value  in 
terms  of  the  old  coins  and  bullion.  For  instance,  the  silver 
coin  worth  82  tael-cents,  mentioned  in  the  passage  quoted 
above,  would  not  always  be  worth  that  much  silver  bullion 
but  might  be  worth  something  quite  different.  Inasmuch  as 
gold  had  not  been  used  as  currency  by  the  Chinese,  to  popu- 
larize this  system  required  intelligent  management  and  was 
no  easy  task.  These  genuine  complications  arising  from 
the  adoption  of  a  new  standard  of  value,  the  Viceroy  in  his 
criticisms  did  not  even  recognize.  All  the  difficulties  he 
alleged  were  based  on  the  supposed  injustice  to  the  merchants 
and  people  which  would  be  imposed  by  the  high  coinage 
ratio  of  silver. 

A  strong  plea  was  made  in  the  last  part  of  the  memorial 
for  the  adoption  of  the  single  silver  standard  and  arguments 
were  advanced  in  support  of  it.  He  maintained  that  the 
countries  in  the  West  used  gold  currency  because  of  their 
advanced  commercial  and  industrial  development,  remuner- 
ative occupations  and  high  prices.  He  maintained  that  the 
gold  standard  was  not  suitable  for  China  on  account  of  the 
wide  difference  in  economic  conditions.  Chang  described 
these  conditions  in  different  parts  of  the  country  as  follows : 

The  people  are  poor,  products  of  labor  cheap,  labor  and  per- 
sonal service  unremunerative,  the  common  people  economical 


IG8  THE  CURRENCY  PROBLEM  IN  CHINA  [368 

in  their  way  of  living.  Therefore  the  daily  expenditures  are 
usually  reckoned  in  terms  of  the  cash.  A  poor  man  limits 
his  daily  expenses  to  not  over  20  cash,  those  of  the  well-to-do 
classes  to  not  more  than  60-70  cash.  In  the  trade  centres 
along  the  seacoast  and  the  River  Yangtze  gold  and  silver,  bul- 
lion or  coins,  circulate  side  by  side  with  the  cash;  but  goods 
from  the  interior,  whether  wholesale  or  retail,  are  always  val- 
ued in  terms  of  the  cash.  Although  in  wholesale  transactions 
silver  bullion  is  also  used  the  cash  is  always  taken  as  the 
standard  coin.  Generally  speaking,  in  the  cities  of  the  Prov- 
inces of  Kuangtung,  Kuangsi,  Yunnan,  Kiangsi,  Chekiang, 
and  Kiangsu,  70-80  per  cent  of  the  business  is  done  in  silver 
currency,  the  remaining  10-20  per  cent  in  the  copper  cash; 
in  the  trade  centres  along  the  banks  of  the  upper  Yangtze 
business  is  done  partly  in  silver  and  partly  in  cash ;  in  the  in- 
terior towns  on  both  sides  of  the  Yangtze  the  proportions  are 
10  per  cent  in  silver  and  90  per  cent  in  cash ;  and  in  the  Prov- 
inces along  the  Huang  River,  99  per  cent  is  cash  and  only  one 
or  two  per  cent  is  silver.  Considering  the  country  as  a  whole, 
China  is  still  partly  silver-  and  partly  copper-using;  but  the 
copper-using  area  exceeds  10  times  the  silver-using  area.  As 
a  rule,  transactions  of  the  Government  are  reckoned  in  silver, 
those  of  the  people  yet  mostly  in  the  copper  cash.  For  these 
reasons,  although  China  is  considered  a  silver-using  country  by 
foreigners,  she  is  still  in  fact  a  copper-using  country.  She  is 
therefore  different  from  the  foreign  countries  where  it  is  suit- 
able to  use  gold  on  account  of  a  high  level  of  prices  and  enor- 
mous wealth. 

These  conditions,  he  maintained,  fully  indicated  that  the 
silver  standard  was  the  most  suitable  for  China.  He  said 
furthermore,  that  if  gold  became  dear  and  silver  cheap  it 
would  be  a  great  encouragement  to  the  development  of  the 
export  trade,  and  consequently  domestic  industries  would 
spring  up  which  in  the  course  of  time  would  render  China 
economically  independent.     Thus  he  added : 


369]  CURRENCY  REFORM  lQg 

For  the  present  we  must  begin  the  reform  by  establishing 
uniformity  in  the  silver  and  copper  currencies.  The  value  of  a 
tael  in  the  cash  should  be  made  fixed  and  definite.  The  values 
of  the  silver  and  copper  currencies  must  stand  in  a  fixed  rela- 
tion to  each  other.  If  this  is  accomplished  the  benefit  to  the 
country  and  people  will  be  immense.  This  is  in  fact  what 
ought  to  be  done  according  to  the  law  of  orderly  progress., 
Then,  when  the  currency  has  been  made  uniform,  when  silver 
and  copper  in  the  coinage  have  come  to  stand  in  a  definite 
ratio,  when  the  use  of  bullion  as  currency  has  been  given  up, 
when  the  order  to  prohibit  the  use  of  gold  for  ornamental  pur- 
poses has  been  enforced,  when  products  of  gold  mining  have 
gradually  increased,  when  within  twenty  years  railroads  have 
spread  over  the  whole  country,  when  silver  coins  have  become 
universally  acceptable,  when  consumption  of  native  products 
has  increased,  when  manufacture  by  means  of  modern  ma- 
chinery has  pushed  into  the  interior,  and  when  the  circulation 
of  silver  has  reached  even  the  remotest  regions  of  the  Em- 
pire— then  investigate  the  situation  and  if  it  is  indeed  neces- 
sary to  have  a  partial  circulation  of  gold  it  may  not  be  too  late 
to  consider  attempting  to  introduce  the  gold  standard. 

The  memorial  as  a  whole  was  a  powerful  plea  for  the 
silver  standard.  Not  only  the  plan  proposed  by  the  United 
States  but  any  species  of  gold  standard  was  regarded  as 
impracticable  in  China.  In  Chang's  opinion  all  efforts  in 
this  direction  should  be  abandoned. 

The  above  memorial  was  closely  followed  by  another  one, 
proposing  the  introduction  of  a  uniform  national  silver  coin- 
age based  on  the  weight  of  the  tael,  and  suggesting  that  an 
experiment  be  made  at  Wuchang,  the  capital  of  the  Pro- 
vince of  which  he  was  the  Viceroy,  with  the  expectation  that, 
if  successful,  the  system  should  be  adopted  for  the  whole 
country. 

This  latter  memorial x  embodied  his  opinions  on  the  ques- 

1  Emp.  K.  H.,  State  Papers,  year  30,  pp.  32-33. 


HO  THE  CURRENCY  PROBLEM  IN  CHINA  [370 

tion  of  the  coinage  unit  as  the  former  on  that  of  the  stand- 
ard. Official  opinion  was  then  divided  on  the  question  of 
the  coinage  unit;  some  favored  the  tael  as  the  suitable 
weight,  others  preferred  the  weight  of  the  dollar,  which  is 
72/100  of  the  weight  of  the  tael.  Chang  Chih-tung  argued 
that  should  the  dollar  unit  be  adopted  the  adjustment,  es- 
pecially in  the  case  of  the  land  tax  and  the  grain  com- 
mutation, where  the  fractions  are  carried  to  the  millionth 
part  of  the  tael  [sze  and  hu),  would  be  exceedingly  difficult. 
Arguments  in  support  of  both  units  were  plenty;  but  the 
Viceroy  decided  that  mere  talk  would  not  settle  the  question, 
so  he  proposed  an  experiment.  His  proposal  was  that  the 
mint  at  Wuchang  should  coin  tael-pieces  according  to  the 
K'up'ing  weight  and  that  all  definitive  policies  should  be 
deferred  until  after  the  results  of  this  practical  experiment 
were  known.  To  this  proposal,  the  imperial  sanction  was 
granted. 

Such  vigorous  representations  made  the  adoption  of  the 
American  plan  impossible,  notwithstanding  the  fact  that  not 
a  few  of  the  officials  at  Peking  were  favorably  disposed  to- 
ward this  plan: — among  others  Chao  Erh-hsun  the  Presi- 
dent of  the  Board  of  Finance.  The  Government  waited 
without  action  for  the  results  of  the  Wuchang  experiment. 
Meanwhile  the  currency  conditions  in  the  Provinces  were 
going  from  bad  to  worse.  Attention  may  now  be  turned 
to  the  activities  of  the  provincial  mints  and  their  conse- 
quences. 

The  New  Copper  Coinage.  The  issue  of  multiples  of  the 
cash  is  a  very  ancient  practice,  the  origin  of  which  can  be 
traced  back  to  the  earliest  stage  of  China's  monetary  his- 
tory.1   The  issues  under  the  reign  of  Hsien-feng  in  the  time 

1  It  is  recorded  that  a  large  coin  was  put  in  circulation  by  Ching 
Wang  of  the  Chow  dynasty  (B.  C.  544-519)  because  the  cash  was 
considered  too  light — Ma  Tuan  Lin,  op.  cit. 


371  ]  CURRENCY  REFORM  1 1 1 

of  the  Tai  Ping  Rebellion,  to  which  we  have  already  re- 
ferred,1 were  not  an  innovation,  but  merely  a  revival  of  an 
old  practice.  The  new  copper  coinage  must  be  looked  upon 
as  the  direct  progeny  of  these  past  practices,  though  unlike 
the  old  cash  coin  the  copper  yuan  has  not  the  square  hole 
in  the  centre  and  is  struck  by  modern  coinage  presses,  not 
cast  in  moulds. 

The  proposal  to  coin  the  cash  by  modern  methods  was 
first  made  in  1897  by  a  censor  by  the  name  of  Ch'en  Ch'i- 
chang,  who  suggested  that  several  denominations  of  the 
cash  be  struck  by  modern  machinery  and  put  into  circula- 
tion.2 The  counterfeiting  practices  with  the  old  cash  had 
then  become  scandalous  and  it  was  suggested  that  coinage 
by  the  new  methods  would  make  counterfeiting  much  more 
difficult.  Like  most  of  the  proposals  of  that  time,  it  led  to 
no  practical  action  for  several  years.  The  new  copper  coin- 
age dates  only  from  the  edict  of  February  2,  1902,  which 
reads  as  follows : 

For  some  time  past  the  legal  currency  in  the  various  Prov- 
inces has  been  insufficient  for  use.  Formerly  the  two  Prov- 
inces of  Fuchien  and  Kuangtung  minted  some  large,  round 
copper  coins  of  excellent  workmanship  that  were  said,  by  the 
people  after  they  were  put  into  circulation,  to  be  convenient. 

The  Province  of  Kiangsu  has  now  taken  up  with  the  same 
plan  and  finds  it  very  convenient  and  beneficial,  and  more- 
over, a  check  upon  the  evil  practices  of  illicit  coming  and  illicit 
melting. 

Let  the  viceroys  and  governors  of  the  Provinces  along  the 
River  Yangtze  and  the  seacoast  provide  the  necessary  funds 
and  adopt  the  aforesaid  plan  and  at  once  mint  these  coins  in 
addition  to  the  others  being  made  by  them,  that  they  may  be 
put  into  general  circulation.     The  legal  cash  of  the  capital 

1  See  supra,  p.  32. 

1  The  Emp.  K.  H.,  State  Papers,  year  23,  p.  21. 


112  THE  CURRENCY  PROBLEM  IN  CHINA  [3~2 

ought  also  to  be  of  the  same  sort ;  therefore,  let  the  Provinces 
of  Fuchien,  Kuangtung,  and  Kiangsu  at  once  forward  to  the 
Board  of  Revenue  several  hundred  thousand  each  of  the 
copper  coins  minted  by  them,  that  the  said  Board  may  pay 
them  out  and  get  them  into  use,  which  we  hope  will  be  bene- 
ficial and  convenient  to  the  people  and  prove  a  help  to  the 
currency.    Respect  this. 

The  copper  yuan  weighs  7.5  grams  and  contains  95  per 
cent  copper  and  5  per  cent  zinc.  It  was  at  first  issued  at 
the  rate  of  100  10-cash  pieces  to  the  dollar.  Since,  accord- 
ing to  Kang  Yu-wei,1  the  actual  values  of  a  tael  silver  and  a 
dollar  were  then  equivalent  to  228  and  169  pieces  in  the 
copper  coins  respectively,  the  copper  yuan  wras  evidently  a 
token  coin.2  The  people  took  to  the  new  coins  readily  and 
they  were  at  first  even  accepted  at  more  than  their  nominal 
value.  The  popularity  of  these  coins  and  the  profits  from 
their  mintage  led  to  the  rapid  multiplication  of  the  mints 
and  increase  of  coinage  machinery.  Coinage  of  money  be- 
came a  means  of  raising  revenues.  The  total  issues  for 
1904  were  estimated  at  about  1,693,700,000  pieces.  The 
total  for  the  next  year  rose  to  7,500,000,000.  At  the  close 
of  the  year,  1905,  16  copper  mints  had  been  established  in 
12  of  the  18  Provinces  with  846  coinage  presses  which,  if 
worked  to  their  full  capacity,  could  turn  out  16  billion  coins 
a  year. 

This  sudden  and  enormous  addition  to  the  circulation 
caused  the  coins  to  depreciate.  The  absence  of  transporta- 
tion facilities  made  rapid  distribution  of  the  output  diffi- 
cult and  irregular,  while  the  congestion  caused  the  utmost 
disorder  and  serious  price  disturbances  in  the  local  markets. 

1  Kang  Yu-Wei,  Chin  Pi  Chiu  Kuo,  vol.  ii,  p.  SI. 

*  By  some  mints  the  copper  yuan  (10-cash  piece)  was  inscribed  as 
"worth  one  hundredth  of  a  dollar"  by  others  simply  as  10-cash,  or 
10  mills. 


373]  CURRENCY  REFORM  H3 

Speculation  in  the  coins  was  extensively  practiced.  The 
old  cash,  being  undervalued  in  terms  of  the  new  copper 
coins,  were  rapidly  disappearing  from  the  principal  city 
markets  through  the  operation  of  Gresham's  Law;  the 
better  ones  were  melted  down  and  the  inferior  ones  driven 
to  the  surrounding  country.  The  copper  yuan  depreciated 
in  terms  of  silver  in  Shanghai  22  per  cent  within  the  year 
1905.1  The  conditions  in  different  Provinces  varied,  but  the 
depreciation  was  general. 

Nominally  intended  to  offer  a  more  convenient  currency 
than  the  old  cash,  the  coinage  thus  resulted  in  a  money- 
raising  policy.  This  abuse  was  all  the  more  glaring  in  view 
of  the  pronounced  desire  of  the  Government  to  reform  the 
currency.  The  depreciation  not  only  caused  business  dis- 
turbances but  entailed  serious  hardships  on  the  poor  and 
the  wage-earners  who  had  to  accept  wage  payments  in  these 
coins. 

Bearing  in  mind  these  results  of  the  operations  of  the  pro- 
vincial mints,  we  may  now  return  to  the  currency  policy  of 
the  Imperial  Government. 

The  preliminary  decision  of  the  Government  was  reached 
and  ten  regulations  for  the  reform  of  the  currency,  accom- 
panied by  a  memorial  in  which  the  currency  conditions  in 
the  country  were  briefly  described,  were  submitted  for  the 
imperial  sanction,  which  was  granted  on  August  22,  1905. 
These  regulations  and  the  memorial  were  followed  by  an- 
other memorial  submitting  eight  regulations  for  the  central 
mint  at  Tientsin.  These  acts  were  results  of  two  years 
deliberation  on  the  part  of  the  Ministers  of  the  Financial 
Commission  and  the  Board  of  Revenue. 

The  passages  in  the  memorial  relating  to  the  condition 
of  the  provincial  silver  coinage  were  as  follows : 

1  U.  S.  Mint  Report,  1906,  p.  191. 


114  THE  CURRENCY  PROBLEM  IN  CHINA  [374 

The  first  coinage  of  silver  in  China  was  undertaken  in  Kuang- 
tung  with  the  object  of  supplanting  the  foreign  dollars  and 
making  good  the  deficiency  in  the  volume  of  the  copper  cash. 
Afterwards  the  Provinces  of  Hupei,  Kiangsu,  Chihli,  Che- 
kiang,  Anhui,  Mukden,  and  Kirin  successively  bought  minting 
machinery  and  proceeded  to  coin;  but  the  coins  minted  dif- 
fered considerably  among  themselves  in  weight  and  fineness, 
and  even  coins  from  the  same  mint  lacked  uniformity,  so  that 
the  people  made  distinctions.  The  coins  of  one  Province,  too, 
were  unable  to  circulate  in  another,  and  thus  they  were  less 
satisfactory  than  the  Mexican  dollar,  which  circulated  gener- 
ally throughout  the  North  and  the  South. 

To  remedy  this  situation  the  Ministers  decided  that  pro- 
vincial mintage  of  coins  must  be  stopped.  The  coins  were 
to  be  struck  by  the  central  mint  but  because  of  the  enormous 
extent  of  the  territory  and  the  immense  population  one 
mint  was  considered  insufficient  They  therefore  recom- 
mended that  the  mints  at  Tientsin,  Nanking,  Wuchang  and 
Canton  should  be  retained  as  branch  mints  for  the  coinage 
of  silver.  What  seems  to  have  given  the  Ministers  the 
greatest  concern  was  the  copper  coinage.  Its  condition 
was  thus  described : 

Recently  there  has  been  added  a  minting  of  copper  coins 
because  of  the  shortage  of  the  ordinary  cash.  The  circula- 
tion of  these  has  found  favor  among  the  people,  and  the  profit 
from  minting  them  has  been  very  great.  The  various  Prov- 
inces, therefore,  have  vied  with  one  another  in  asking  permis- 
sion to  establish  mints,  and  there  has  been  no  end  of  confusion 
as  a  result.  Because  of  this  competition,  too,  recently  the 
prices  of  machinery,  copper,  and  lead  have  risen,  and  the 
worth  of  the  copper  coins  has  depreciated.  If  the  provincial 
mints  are  to  go  on,  each  coining  for  its  own  use,  each  having 
its  own  way,  perhaps  the  price  will  still  further  rise  and  the 
value  of  the  cash  still  further  depreciate,  and  after  a  few 
years  the  demand  for  the  new  coins  will  be  fully  supplied, 


375]  CURRENCY  REFORM  H5 

their  circulation  will  not  be  easy,  and  there  will  be  a  gradual 
loss  on  the  capital  invested.  Moreover,  in  the  new  commercial 
treaties  there  is  an  article  providing  that  a  uniform  currency 
shall  be  adopted,  but  if  each  Province  shall  be  allowed  to  have 
its  own  coinage  we  shall  probably  be  far  from  fulfilling  the 
intention  to  have  a  uniform  currency. 

This  being  the  case  the  proper  remedy  would  have  been 
to  put  a  stop  to  this  copper  coinage  altogether ;  but  instead 
the  Ministers  declared  that  the  Provinces  were  not  yet  sup- 
plied with  a  sufficient  amount  of  these  coins.  Therefore 
they  decided  that  for  the  present  the  local  coinage  should 
be  allowed  to  continue,  but  that  such  coinage  must  conform 
to  certain  prescribed  uniform  regulations. 

Nothing  was  said  of  the  standard  in  this  memorial  and 
the  regulations  for  the  reform  of  the  currency;  but  in  the 
mint  regulations  were  embodied  the  following  general 
declarations :  ( i )  The  coinage  in  three  metals  will  be  known 
as  "  the  Ta-ch'ing  x  gold  coinage  ",  "  the  Ta-ch'ing  silver 
coinage  ",  and  "  the  Ta-ch'ing  copper  coinage  ".  All  three 
are  designed  for  general  circulation  throughout  the  Em- 
pire. Again  (2)  ''The  original  intention  in  the  establish- 
ment of  the  central  mint  was  the  reform  of  the  currency  by 
issuing  a  currency  in  three  metals,  gold,  silver  and  copper; 
but  the  establishment  of  a  currency  system  is  a  matter  of 
serious  importance  and  we  cannot  avoid  a  careful  investi- 
gation to  determine  the  proper  weight  and  fineness  of  the 
gold  and  silver  coins,  and  this  problem  has  yet  to  be  thor- 
oughly considered  and  decided."  The  question  of  the  coin- 
age unit  was  also  left  an  open  one. 

Article  1  of  the  regulations  prescribed  rules  for  the  con- 
trol of  the  silver  coinage  to  be  put  into  effect  after  the 
weight  and  fineness  of  the  coins  had  been  decided  upon  and 

1  The  name  of  the  Manchu  dynasty. 


n6  THE  CURRENCY  PROBLEM  IN  CHINA  [376 

sanctioned.  Four  of  the  provincial  mints,  namely  those  at 
Tientsin,  Nanking,  Canton  and  Wuchang,  were  to  be  re- 
tained as  branch  mints  of  the  central  mint.  Articles  2,  3, 
4  and  5  dealt  exclusively  with  the  copper  coinage.  There 
were  to  be  no  more  new  copper  mints ;  but  those  already  in 
operation  were  permitted  to  continue  their  minting  in  ac- 
cordance with  a  set  of  uniform  rules.  These  rules  speci- 
fied that  the  copper  coins  were  to  be  of  the  fineness  of  95 
per  cent  pure  copper  and  5  per  cent  zinc,  and  that  the  coins 
issued  were  to  be  in  the  following  proportions:  10-cash 
pieces,  50  per  cent  of  the  whole  number;  5-cash  pieces,  20 
per  cent  of  the  whole  number,  and  2-cash  pieces,  also  20 
per  cent  of  the  whole  number,  20-cash  pieces,  the  remain- 
ing 10  per  cent.  The  gross  weights  of  the  coins  were  to  be: 
20-cash  piece,  4  mace  K'up'ing;  10-cash  piece,  2  mace; 
5-cash  piece,  1  mace;  2-cash  piece,  4  candareens.  The 
amount  of  the  issues  must  conform  to  the  actual  de- 
mand of  the  market;  interprovincial  movements  of  the  coins 
in  large  quantities  were  not  to  be  permitted. 

Article  6  required  quarterly  reports  of  the  provincial  au- 
thorities to  the  Financial  Commission  and  the  Board  of 
Revenue.  Article  7  dealt  with  the  method  of  securing  silver 
for  coinage  at  the  central  mint.  Article  8  declared  that 
the  coinage  of  money  was  a  prerogative  of  the  Sovereign 
and  prohibited  the  merchants  from  asking  permission  to 
coin  the  copper  yuan  for  profit.  Article  9  declared  that 
the  coins  issued  by  the  central  mint  were  to  be  of  universal 
acceptability.  Article  10  prohibited  the  prevalent  practice 
of  stamping  and  putting  into  circulation  the  Japanese  cop- 
per discs,  and  required  the  mints  to  melt  the  copper  them- 
selves. 

The  one  conspicuous  feature  of  this  Act  was  not  what  it 
decided  but  what  it  left  undecided.  On  almost  all  the 
crucial  questions  the  Government  had  not  yet  made  up  its 
mind. 


377]  CURRENCY  REFORM  ny 

Three  months  after  the  above  memorials  and  regula- 
tions had  been  published,  the  Ministers  of  the  Financial 
Commission  and  of  the  Board  of  Revenue  submitted  further 
and  more  definite  regulations.  In  rejecting  the  proposal 
for  introducing  the  new  system  on  the  gold  standard  the 
Ministers,  in  the  memorial  submitting  the  new  regulations, 
declared  that  China's  accumulations  of  gold  were  not  large 
and  that  hitherto  both  in  public  and  private  transactions  it 
had  been  customary  to  use  silver  and  copper.  Hence  they 
deemed  it  unwise  to  accept  the  gold  standard.  In  another 
place  they  stated  that  after  the  silver  coinage  had  been  suc- 
cessfully introduced  into  circulation,  then  they  would  con- 
sider the  matter  of  accumulating  bullion  for  the  minting  of 
gold  coins. 

Accepting  the  silver  standard,  the  Ministers  addressed 
themselves  to  the  question  of  the  coinage  unit,  which  was 
then  the  most  important  issue  between  the  contending  parties, 
some  supporting  the  tael  unit,  others  the  dollar  unit.  The 
choice  of  the  Government  was  for  the  tael  according  to  the 
Treasury  scale,  the  K'up'ing  tael.  The  Ministers,  to  sup- 
port their  decision,  cited  the  opinions  of  both  the  Viceroy 
Chang  Chih-tung  and  the  Viceroy  Yuan  Shih-kai  in  favor 
of  this  unit.  During  the  introductory  stage  not  less  than 
certain  fixed  percentages  of  all  payments,  public  and  private, 
were  to  be  made  in  the  new  national  coins.  The  subsidiary 
silver  coins  were  to  be  legal  tender  to  the  amount  of  10 
taels,  that  is,  to  the  value  of  10  of  the  i-tael  coins.  No 
limitations  were  provided  on  the  legal-tender  quality  of  the 
copper  coinage.  In  other  words  the  Act  left  the  parallel- 
standard  currency  substantially  as  it  had  been  before.  The 
treatment  of  the  copper  coinage  was  left  an  open  question 
until  the  provincial  officials  had  made  their  reports  con- 
cerning it.  It  need  hardly  be  emphasized  that  for  this  rea- 
son the  reform  Act  was  not  a  thorough  but  a  half-way  meas- 


H8  THE  CURRENCY  PROBLEM  IN  CHINA  [378 

ure.  A  special  edict  was  issued  sanctioning  these  new  regu- 
lations on  the  19th  of  November,  1905. 1  On  December 
7th  of  the  same  year  the  copper  coinage  was  ordered  sus- 
pended for  a  period  of  three  months,  awaiting  results  of 
investigations. 

To  recapitulate.  Serious  consideration  of  the  reform  of 
the  currency  began  after  the  year  1900,  largely  on  account 
of  the  changed  political  conditions  and  of  the  financial  crisis 
precipitated  by  the  fall  in  the  gold  value  of  silver  during 
the  years  1902-3.  The  Government  of  the  United  States 
offered  its  assistance  and  through  the  Commission  on  In- 
ternational Exchange  suggested  the  gold-exchange  standard 
system,  the  adoption  of  which  was  blocked  chiefly  by  the 
opposition  of  the  Viceroy  Chang  Chih-tung.  In  spite  of  all 
the  efforts  made  during  these  years  the  Acts  of  August  and 
November,  1905,  were  disappointing.  In  the  first  place,  the 
copper  currency  question  was  left  undecided.  Again,  no  ade- 
quate provision  was  made  for  the  treatment  of  the  old  coins. 
As  a  matter  of  fact  these  Acts,  as  we  shall  presently  see, 
came  to  naught  as  soon  as  they  were  issued.  The  officials 
had  shown  very  little  appreciation  of  the  magnitude  of  their 
task  and  little  energy  in  coping  with  it,  largely  because  of 
their  inexperience  and  lack  of  previous  training.  The 
general  attitude  seems  to  have  been  that  since  the  currency 
has  been  in  bad  condition  for  generations  they  could  afford 
to  delay  yet  for  a  few  years.  During  this  period  there 
was  no  better  example  of  the  impotence  of  the  Central  Gov- 
ernment than  the  abuse  of  the  coinage  by  the  Provinces  in 
issuing  copper  yuan  for  purposes  of  revenue.  Another  five 
years  had  to  elapse  before  a  reform  scheme  was  drawn  up 
that  was  practicable,  complete  in  its  parts,  and  intended  for 
actual  execution. 

1  For  the  text  of  the  act  see  Appendix  II. 


CHAPTER  V 
Currency  Reform,  From  1906  to  the  Revolution 

The  tael  coinage  Act  of  November,  1905,  was  never  put 
into  effect,  the  whole  subject  of  the  reform  of  the  currency 
being  subsequently  reconsidered.  Such  questions  as  the 
standard,  the  size  of  the  silver  unit,  and  the  treatment  of  the 
copper  currency  which  had  been  left  undecided,  were  all  re- 
opened. Those  who  had  favored  the  gold  standard  were 
naturally  disappointed,  but  the  real  disagreement  at  the  time 
was  over  the  question  of  the  coinage  unit  and  of  the  fineness 
of  the  silver  in  the  coinage  of  the  standard  piece.  Many 
objected  to  the  choice  of  the  tael  unit  and  held  that  the 
dollar  (Mexican),  72/100  parts  of  the  K'up'ing  tael,  being 
less  heavy,  was  more  suitable.  Much  time  and  energy  was 
wasted  over  this  question,  apparently  to  no  really  useful 
purpose.  For  instance,  the  controversy  centered  on  the  ques- 
tion of  the  relative  familiarity  of  the  people  with  these  two 
units;  yet  as  a  matter  of  fact  neither  the  tael  (K'up'ing,  or 
Treasury)  nor  the  dollar  (Mexican)  was  universally  recog- 
nized the  country  over  as  a  monetary  unit ;  hence  in  either 
case  adjustments  would  be  necessary.  The  proper  criterion 
to  determine  the  size  o<f  the  standard  coin  was  suitability  to 
the  economic  conditions  of  the  country;  in  this  light  the 
dollar  or  a  smaller  coin  should  have  stronger  claims  than  the 
tael,  which  is  altogether  too  heavy.  Indeed  the  tael  weighs 
about  as  much  as  one  and  a  half  American  silver  dollars. 

The  disagreement  over  the  question  of  the  fineness  of  the 
silver  in  the  coinage  of  the  standard  pieces  was  more  serious. 
Those  who  wrere  conversant  with  monetary  principles  pointed 
379]  119 


120  THE  CURRENCY  PROBLEM  IN  CHINA  [380 

out  that  there  should  be  free  coinage  of  the  standard  coins 
either  without  charge,  or  subject  to  a  brassage  charge  for 
covering  the  expense  of  assaying,  loss  of  interest  and  the  cost 
of  the  alloy.  For  these  reasons  the  November  Act  fixing 
the  fineness  at  960,  while  the  K'up'ing  silver  is  987-5  fine, 
was  considered  defective.  The  principle  involved  is  a  simple 
one.  Should  the  people  lack  confidence  in  the  system  the 
coin  would  probably  depreciate,  while,  if  it  was  accepted  at 
par  value,  the  high  seigniorage  would  be  inducement  to 
counterfeiting.  The  fundamental  importance  of  this  point 
the  responsible  Ministers  failed  to  appreciate  when  the  regu- 
lations were  drafted.  Disagreement  over  these  questions 
together  with  the  unsettled  copper-currency  problem  offered 
ample  opportunity  and  excuse  for  delay  and  inaction  and 
the  final  reform  Act  was  not  drawn  up  and  promulgated 
until  May,  19 10. 

The  Act  of  1905  left  the  copper-currency  question  an 
open  one,  and  operations  at  the  copper  mints  were  suspended 
for  three  months  by  the  edict  of  December  7  of  the  same 
year.  Under  the  nominal  control  of  the  Tu-chih  Pu,  or 
Board  of  Finance  (a  new  name  for  the  old  Board  of 
Revenue,  Hu  Pu)  the  minting  was  soon  resumed.  Issues 
from  the  mints  continued  to  be  steady  and  enormous.  No 
attention  was  paid  to  the  actual  demand  for  cash,  since,  as 
has  been  explained,  the  coinage  of  these  copper  yuan  pieces 
was  depended  upon  as  a  means  of  raising  revenues  for  the 
support  of  the  provincial  governments.  Violent  fluctua- 
tions in  the  silver  value  of  these  coins  took  place  almost 
daily,  and  there  were  frequent  complaints  of  the  disappear- 
ance of  the  old  cash.1 

1  Within  the  years  1906-09  the  depreciation  of  the  copper  yuan 
currency  was  not  less  than  62  per  cent  according  to  a  statement  made 
in  the  British  Parliament.     U.  S.  Mint  Report,  1910,  p.  223. 

The  tael   coinage  at  Wuchang  undertaken   by  the  Viceroy  Chang 


381]  CURRENCY  REFORM  I2i 

No  accurate  statistics  of  the  issues  of  the  copper  mints  are 
available  and  the  exact  amount  issued,  including  the  counter- 
feit coins,  will  perhaps  never  be  known.  Mr.  K'ang  Yu-wei 
puts  the  figures  for  the  years  1906,  1907  and  1908  at  1,- 
709,384,000;  2,851,200,000;  and  1,428,000,000  pieces  re- 
spectively.1 There  are  no  complete  reports  for  1909  when 
coinage  was  suspended  in  most  of  the  mints.  During  this 
year  the  mint  at  Mukden  emitted  10-  and  20-cash  pieces 
23,609,267  in  number,  and  the  mint  at  Tientsin  138,387,500 
in  20-,  10-,  5-  and  2-cash  pieces.  The  Government  in  19 10 
estimated  the  new  copper  yuan  coinage  at  a  silver  value  of 
100,000,000  taels.  The  disposal  of  the  copper  currency  was 
provided  for  in  the  final  reform  Act  of  19 10. 

The  rise  of  the  gold  value  of  silver  during  the  years 
1905-07  put  a  premium  on  silver  in  meeting  foreign  gold 
obligations  and  relieved  the  Government  for  the  time  being 
of  the  anxiety  which  it  had  felt  since  the  fall  of  exchange 
began  in  1901.  The  steps  taken  to  deal  with  this  rise  by 
those  countries  that  had  adopted  the  gold-exchange  stand- 
ard system  are  highly  instructive  and  may  be  briefly 
reviewed. 

The  rise  in  the  gold  price  of  silver  began  in  1904.  By 
November,  1906,  silver  had  reached  its  highest  point  since 
1893.  ^n  the  Philippine  Islands  when  the  value  of  the 
silver  peso  reached  and  threatened  to  exceed  its  face  value 
the  insular  Government  passed  an  act,  November  17,  1905, 
prohibiting  the  exportation  of  the  Philippine  currency.2  This 

Chih-tung  as  an  experiment  was  not  well  received  and  the  tael  pieces, 
reported  to  amount  to  a  total  of  648,000  had  to  be  subsequently  re- 
tired and  melted.  The  tael  coin  was  described  as  equal  to  37,300 
grams,  3  millimeters  in  thickness,  41  millimeters  in  diameter  and  was 
of  the  following  fineness :  silver  .877 ;  copper  .070 ;  tin  .053.  U.  S.  Mint 
Report,  1906,  p.  184. 

1  Op.  cit.,  vol.  ii,  pp.  51-2. 

a  House  Doc,  59  C,  1  S.,  vol.  ii,  Act  no.  1411. 


122  THE  CURRENCY  PROBLEM  IN  CHINA  [382 

action  was  meant  as  a  temporary  expedient.  The  steady 
rise  in  the  latter  part  of  1906  raised  the  gold  price  of  the 
peso  as  bullion  to  1.11,  and  notwithstanding  the  heavy 
penalties  imposed  for  exporting,  coins  continued  to  be  taken 
out  of  the  country  in  one  way  or  another,  as  the  Secretary 
of  Finance  and  Justice  reported.1  To  prevent  a  serious  con- 
traction of  the  currency  it  was  decided  to  decrease  the  silver 
content  of  the  coins.  So,  in  accordance  with  an  act  of 
Congress  (June  23,  1906),  the  Philippine  Commission  (Act 
No.  1564,  Dec.  6,  1906)  provided  a  new  silver  coinage  and 
fixed  the  weight  and  fineness  of  the  new  coins  as  follows : 
peso  20  grams  of  silver  800  fine,  the  subsidiary  coins  pro- 
portionate in  weight  but  only  750  parts  fine.  For  some  time 
the  two  kinds  of  coins  were  in  circulation  side  by  side. 

The  Government  of  the  Straits  Settlements  adopted  a  simi- 
lar policy.  It  demonetized  in  1907  the  coins  minted  since 
1903  and  reduced  the  weight  of  the  standard  coin  from 
26.957  grams  to  20.2172  grams. 

Siam  adopted  a  different  procedure.  She  rejected  the 
policy  of  decreasing  the  fineness  and  weight  of  the  coin,  but 
advanced  the  treasury  rate  of  the  tical  by  2d.  from  is.  4 d. 
to  is.  6d.  The  raising  of  the  gold  value  of  the  tical  caused 
considerable  trouble  in  banking  and  commercial  circles. 

Mexico  followed  still  a  different  course.  Article  XII  of 
the  Project  of  Monetary  Reform  provided  that  if  the  gold 
price  of  silver  should  rise  so  that  the  silver  dollars  should 
come  to  possess  a  metallic  value  equal  to  or  greater  than 
that  ascribed  to  them  by  the  legal  ratio  adopted,  steps  should 
be  taken  to  demonetize  the  silver  coins  and  to>  introduce  the 
gold  standard  with  the  free  coinage  and  use  of  gold  as  a 
medium  of  exchange.2     The  rise  of  silver  in  1906-07  fur- 

1  House  Doc,  60  S.,  1  S.,  vol.  x. 

*  Report  of  the  Com.  on  Int.  Exc,  1904,  p.  422. 


383]  CURRENCY  REFORM  I2$ 

nished  the  occasion  for  this  change  contemplated  in  the  law. 
Mexico  immediately  took  advantage  of  the  situation.  The 
silver  coins  were  exported  to  the  amount  of  $85,956,202  and 
sold  at  a  premium  while  gold  was  coined  to  the  amount  of 
$71,646,500  which  went  chiefly  to  the  reserves  of  the  banks. 
In  this  way  Mexico  passed  to  the  "  limping  standard."  ' 

The  experience  of  these  countries  taught  some  useful  les- 
sons. In  the  first  place,  the  necessity  of  having  the  margin 
between  the  bullion  and  legal  value  of  the  silver  coin  under 
the  gold-exchange  standard  wide  enough  to  allow  for  a  con- 
siderable rise  in  the  gold  price  of  silver  in  the  market  was 
fully  demonstrated.  The  difficulty  of  deciding  what  the 
ratio  ought  to  be,  was  likewise  shown,  for  what  had  been 
regarded  as  a  safe  margin  in  1903,  a  margin  of  15  to  20 per 
cent,  was  made  to  disappear  by  a  steady  rise  of  the  bullion 
value.  In  delaying  action  the  Chinese  Government  had 
thus  saved  itself  from  the  additional  trouble  of  modifying 
the  system  as  these  other  countries  were  compelled  to  do. 

Secondly,  the  experience  of  Mexico  demonstrated  the 
usefulness  of  the  gold-exchange  standard  as  a  transitional 
currency  system;  for,  if  sufficient  gold  can  be  obtained  to 
supply  all  the  needs  of  the  country,  while  maintaining  the 
par  value  of  the  token  coins,  the  country  may  automatically 
pass  to  the  "  limping-standard  "  stage  of  the  gold-standard 
system. 

As  the  settlement  of  the  currency-reform  question  was 
delayed  by  continued  postponement,  many  of  the  officials, 
particularly  those  who  had  to  do  with  foreign  relations, 
grew  impatient.  Early  in  1907  the  Chinese  Minister  at 
London,  Mr.  Wang  Ta-hsieh  (now  Minister  of  Education 
in  the  Cabinet),  memorialized  the  throne  urging  the  adop- 

1  Economic  Journal,  June,  1909.  Mr.  C.  A.  Conant's  article  on 
"The  Gold-Exchange  Standard  in  the  Light  of  Experience." 


I24  THE  CURRENCY  PROBLEM  IN  CHINA  [384 

tion  of  the  gold  standard.  The  Board  of  Finance  severely 
criticized  this  memorial  and  pointed  out  the  superficial  char- 
acter of  the  arguments  therein  advanced.1  In  addition  the 
Board  of  Finance  announced  an  outline  of  the  policy  it  ex- 
pected to  pursue.  To  this  outline  of  policy  we  may  now 
turn  our  attention. 

The  Board  of  Finance  recognized  the  necessity  of  estab- 
lishing the  currency  on  the  gold  basis  as  early  as  possible. 
It  declared  that  the  pure  gold  system,  such  as  is  found  in 
countries  where  the  gold-standard  coin  is  the  only  legal- 
tender  coin  among  all  the  coins  in  circulation,  the  silver  and 
copper  coins  being  subsidiary  and  limited  in  legal-tender 
quality,  was  impracticable.  Nor  was  the  limping  gold 
standard,  such  as  is  found  in  countries  (the  Uniter  States, 
France,  etc.)  where  some  silver  coins  minted  at  a  fixed 
ratio  with  gold  enjoy  unlimited  legal-tender  privileges, 
practicable  in  China.  The  Board  found  that  China  had  not 
such  a  stock  of  gold  as  the  adoption  of  the  former  sys- 
tem would  require,  and  that  the  latter  was  not  suitable  be- 
cause it  is  the  result  of  historical  circumstances  not  found 
in  China.  The  gold-exchange  standard  was  found  to  be 
the  only  feasible  system.  It  must  therefore  be  the  aim  of 
the  reform.  To  attain  this  aim  the  Board  found  four  pos- 
sible courses  to  follow. 

(1)  To  introduce  the  uniform  national  coinage  based  on 
silver ;  and  subsequently  to  give  the  silver  currency  a  fixed 
parity  with  gold;  —  the  course  by  which  British  India 
adopted  her  gold  standard. 

(2)  To  introduce  the  silver  coins  at  a  fixed  value  in  gold 
at  the  very  beginning,  and  to  maintain  them  thereafter  at 
their  gold  value ;  this  being  the  Philippine  currency  system. 

(3)  To  introduce  the  system  in  a  manner  similar  to  (2)  ; 

1  Chinese  Govt.  Reforms  under  Kuang  Hsu,  vol.  x,  pp.  S1^. 


385]  CURRENCY  REFORM  12.$ 

but  at  the  same  time  to  introduce  a  partial  note  circulation 
as  a  substitute  for  token  silver  coins. 

(4)  To  introduce  the  new  national  silver  coins  on  the 
silver  basis  to  replace  the  old  coins  and  bullion  currency. 
Subsequently  to  extend  the  note  circulation  to  replace  the 
new  standard  coins ;  the  coins  so  withdrawn  to  be  held  as  a 
trust  fund  or  sold  for  gold.  When  the  note  circulation  be- 
comes universal,  to  declare  for  free  coinage  of  gold  at  the 
market  ratio  of  a  given  time  and  convert  the  silver  notes 
into  gold  notes.  If  the  gold  reserves  prove  insufficient  at 
any  time  the  notes  may  be  redeemable  in  silver  bullion  at 
its  market  value  in  gold. 

The  last  procedure  the  Board  attributed  to  a  suggestion 
said  to  have  originated  with  Samuel  Ingham,  Secretary  of 
the  Treasury  of  the  United  States  under  President  Jack- 
son. Ingham  had  recommended  that  gold  certificates  should 
be  issued  in  exchange  for  silver  which  was  to  be  kept  in 
stock.  These  certificates  should  be  issued  at  the  mints  and 
the  Treasury  on  demand.  When  they  were  presented  for 
redemption  the  Government  should  give  silver  bullion  at 
the  gold  value  in  the  market.  In  this  way  it  was  expected 
to  establish  the  single  gold  standard  without  serious  diffi- 
culty. 

The  Board  compared  these  four  courses  and  found  the 
fourth  preferable  because  it  combined  the  advantages  of 
the  others  while  free  from  the  objections  against  them. 
In  adopting  this  course  the  necessary  steps  to  take  would 
be  (a)  to  prepare  the  necessary  administrative  machinery, 
(b)  to  put  into  circulation  the  silver  coins,  (c)  to  replace! 
the  coins  by  substituting  a  note  circulation,  (d)  to  re- 
coin  the  standard  pieces  into  subsidiary  coins,  and  finally  to 
declare  for  gold  coinage  at  the  market  ratio  of  the  day  and 
maintain  the  circulation  at  that  ratio  thereafter.  The  es- 
sential thing  as  a  preparation,  the  Board  declared,  would  be 


I26  THE  CURRENCY  PROBLEM  IN  CHINA  [386 

to  prepare  a  sufficient  gold  stock,  to  accomplish  which 
would  require  six  or  seven  years  of  strenuous  effort. 

This  State  paper  is  in  striking  contrast  with  the  memor- 
ials and  edicts  that  had  been  issued  up  to  date.  It  indicates 
that  the  Board  of  Finance  was  no  longer  constituted  of 
men  without  experience  and  knowledge  as  had  generally 
been  the  case  in  the  past.  The  course  of  action  it  announced 
as  best,  however,  was  not  intended  to  be  put  into  immediate 
effect.  On  political  and  financial  grounds  a  bank-note  cir- 
culation should  be  preferable  to  Government  currency  notes. 
Yet  without  a  sound  and  strong  banking  system  to  extend 
and  maintain  it,  such  a  course  was  indeed  a  mere  theoretical 
possibility.  For  many  years  a  metallic  currency  must  be 
the  only  suitable  one  for  the  bulk  of  transactions  in  China, 
and  the  masses  could  not  be  expected  to  acquire  the  habit  of 
using  credit  money  in  a  short  while.  It,  however,  opened 
a  new  way  of  passing  from  a  silver  to  a  gold  basis,  differing 
from  the  procedure  of  British  India. 

Commenting  on  the  policy  thus  outlined,  the  Ministers  of 
State  subsequently  declared  that  the  reform  must  be  under- 
taken step  by  step,  and  dwelt  at  considerable  length  upon 
the  difficulties  of  introducing  this  plan  of  reform.  But 
nothing  further  was  heard  about  their  scheme,  and  the  Gov- 
ernment continued  its  policy  of  inaction. 

Another  memorial  came  from  the  special  ambassador  to 
the  United  States,  Tong  Shao-yi,  urging  that  the  treaty 
provisions  pledging  the  Government  to  reform  the  currency 
should  be  speedily  carried  into  effect.  This  memorial  led 
the  Government  to  make  another  attempt  to  establish  the 
tael  coinage.  An  edict  was  issued  on  October  5,  1908,  in 
response  to  a  memorial  inspired  by  Tong  Shao-yi  but  sub- 
mitted by  the  Prince  of  Ch'ing,  other  Ministers  of  State 
and  by  Prince  Pu-lun  and  other  members  of  the  newly- 


387]  CURRENCY  REFORM  12y 

constituted  Advisory  Council.1  In  this  memorial,  the  Min- 
isters declared  that  the  Government  had,  after  consulting 
the  high  provincial  officials,  decided  already  for  the  silver 
standard;  but  that  there  had  been  some  difference  of  opin- 
ion as  to  the  size  of  the  coinage  unit.  Eleven  Provinces 
were  found  to  be  for  the  tael  unit  while  eight  were  for  the 
dollar.  The  Ministers  reiterated  their  preference  for  the 
tael  unit  and  sought  to  meet  objections  against  its  weight 
by  accepting  a  suggestion  made  by  the  Viceroy  Tuan  Fang 
to  the  effect  that  half-tael,  or  5-mace,  pieces  be  coined  in 
large  amount  to  be  circulated  as  unlimited  legal  tender  to- 
gether with  the  standard  coins.  The  standard  and  half- 
tael  pieces  were  to  be  accepted  at  their  bullion  value  as  pure 
silver,  the  expenses  of  minting  to  be  borne  by  the  Govern- 
ment and  met  by  the  profit  from  the  subsidiary  coinage. 
The  latter  was  to  be  of  two  silver  coins  of  one  mace  and  of 
five  candareens,  880  fine  as  against  980  fine  for  the  tael 
and  half-tael  coins.  These  proposals  were  approved  by 
the  edict. 

The  whole  proposal  was  a  half-way  and  incomplete  meas- 
ure. Not  a  word  was  said  either  in  the  memorial  or  in  the 
edict  about  the  treatment  of  the  old  coins  and  the  copper 
coinage.  The  Act  suffered  the  same  fate  as  its  predecessor 
(Act  of  November  19,  1905),  and  was  a  dead-letter  from 
the  day  it  was  promulgated.  Meanwhile  the  Board  of 
Finance  had  established  a  Bureau  of  Currency  Reform  for 
investigating  the  currency  conditions  and  a  widespread  in- 
quiry was  conducted.2  The  final  act  was  drafted  and,  after 
the  imperial  sanction  had  been  given,  issued  in  May,  19 10. 

1  Ch.  Govt.  Ref.  under  Kuang  Hsu,  vol.  x,  pp.  60-62.  Also  U.  S. 
Mint  Rep.,  1909,  p.  248. 

2  Mr.  Tong  Shao-yi  upon  his  return  from  the  United  States  made 
a  series  of  suggestions  on  the  questions  of  currency  reform  to  the 
Board  of   Finance.    These   suggestions  were  on  five  heads,  namely, 


I28  THE  CURRENCY  PROBLEM  IN  CHINA  [388 

The  currency-reform  measures  of  May,  1910,1  consisted 
of  an  edict  issued  on  the  16th  of  the  4th  month,  the  second 
year  of  Hsuan  Tung  (May  24,  19 10),  and  a  series  of  regu- 
lations and  memorials.  The  edict  stated  that  the  Govern- 
ment had  decided  that  for  the  present  silver  was  to  be  the 
standard  and  the  unit  of  the  currency  was  to  be  the  yuan, 
in  gross  weight  72/100  of  the  K'up'ing  tael  (reckoned  at 
37.301  grams),  that  is,  26.856  grams,  900  fine,  the  weight 
in  fine  silver  being  648/1000  K'up'ing  tael.  Thus  the 
previous  decision  to  base  the  currency  on  the  K'up'ing  tael 
unit  was  reversed.  Subsidiary  coins  in  silver,  nickel  and 
copper,  on  the  decimal  system,  were  provided.  The  new 
coins  must  be  used  in  the  payment  of  dues,  public  or  private, 
and  the  old  coins  and  bullion  were  to  be  permitted  to  circu- 
late only  within  a  prescribed  limit  of  time.  The  old  coins 
were  to  be  exchanged  for  the  new  ones  by  the  Government 
Bank  and  the  mints,  and  timely  preparations  were  to  be 
made  for  this  exchange.  Refusal  to  accept  the  national 
coinage  or  to  force  its  acceptance  at  a  discount  was  to  ba 
an  unlawful  act. 

the  standard,  the  size  of  the  silver  coin,  the  fineness  of  the  silver 
in  the  coinage,  the  subsidiary  coinage,  and  the  treatment  of  the  exist- 
ing copper  currency.  On  the  question  of  the  standard  Mr.  Tong 
reached  the  conclusion  that  the  reform  had  best  begin  on  the  silver- 
standard  basis,  but  with  the  ultimate  aim  of  attaining  the  gold  stand- 
ard. He  found  that  the  gold-exchange  standard  would  be  very  diffi- 
cult to  enforce  in  China,  and  that  the  difficulty  was  that  the  token 
coins  under  this  system  would  be  continually  fluctuating  in  terms  of 
the  silver  bullion.  Again,  he  feared  that  the  coins  might  depreciate 
through  over-issue  for  the  seigniorage.  He  favored  the  adoption  of 
a  unit  of  the  weight  of  the  dollar.  On  the  question  of  the  treatment 
of  the  copper  currency  Mr.  Tong  suggested  that  the  new  coins  should 
be  used  to  retire  the  old,  and  pointed  out  the  fault  of  the  previous 
Acts  in  not  including  the  copper  currency  in  the  reform  considerations 
but  treating  it  as  an  independent  system  by  itself. 

1  For  the  text  of  the  Act  see  Appendix  III. 


389]  CURRENCY  REFORM  i2g 

Provisions  were  made  for  the  first  time  for  the  treatment 
of  the  old  coins.  These  provisions  were  embodied  in  a 
separate  memorial  of  the  Board  of  Finance.  In  this  memor- 
ial the  Board  submitted  its  findings  about  the  silver  and 
copper  coinages.  The  silver  dollars  coined  at  the  provincial 
mints  were  estimated  at  40,000,000  and  the  number  of  frac- 
tional silver  coins,  mostly  10-  and  20-ceht  pieces,  at  the 
enormous  sum  of  1,400,000,000.  To  retire  them  by  ex- 
changing them  for  the  new  coins  would,  as  the  Board  esti- 
mated, entail  a  loss  of  20,000,000  yuan  in  the  five  items  of 
inferior  touch,  exchange,  transportation,  refining  and  loss 
of  interest.  This  cost  the  Government  was  not  prepared  to 
face.  As  an  alternative  plan  the  Board  decided  that,  when 
the  new  coins  were  being  introduced,  the  old  silver  coins 
both  large  and  small  should  continue  to  circulate  for  a  time 
at  their  market  value.  At  the  same  time  they  were  to  be 
gradually  redeemed  at  the  market  rate  and  reminted  into 
the  new  coins.  After  the  new  coins  had  been  issued  in  suffi- 
cient quantities,  a  definite  date  was  to  be  fixed  for  stopping 
the  circulation  of  the  old  coins  and  they  must  thereafter  be 
exchanged  for  the  new  coins  according  to  their  bullion 
value. 

The  treatment  of  the  copper  coinage  the  Board  consid-« 
ered  as  the  most  difficult  problem.  The  total  value  of  these 
copper  yuans  in  silver  was  estimated  at  100,000,000  taels. 
The  Board  declared  that  in  dealing  with  these  coins  both 
the  interest  of  the  Government  and  that  of  the  people  must 
be  considered.  One  of  the  plans  suggested  was  to  withdraw 
and  remint  them  into  the  new  coinage ;  another  was  to  re- 
store the  original  decimal  value  of  these  copper  coins.  Both 
of  these  plans  the  Board  regarded  as  impracticable;  the 
former  because  of  the  expense  involved  and  because  of  the 
necessity  of  depressing  the  value  of  the  coins  in  order  to  get 
a  return  to  cover  the  reminting  expenses;  the  latter  be- 


^o  THE  CURRENCY  PROBLEM  IN  CHINA  [390 

cause  of  the  necessity  of  raising  the  value  of  the  coins  so 
that  the  market  value  might  be  made  equal  to  the  legal 
value.  The  policy  decided  upon  was  that  the  copper  coins 
were  to  be  permitted  to  circulate  for  a  limited  period  of 
time  while  the  new  coins  were  being  introduced.  Proclama- 
tions were  to  be  issued  by  the  authorities  to  the  effect  that 
the  old  coins  were  to  be  legal  tender  to  the  amount  of  three 
yuan  from  the  date  the  new  coins  were  issued,  and  in  the 
second  year  to  the  amount  of  one  yuan.  At  the  same  time 
the  Board  was  to  take  measures  to  redeem  the  coins  and 
remint  them  to  the  requisite  amount  as  2-cent  and  5-mill 
subsidiary  coins.  The  best  10-cash  pieces  might  also  be 
selected  to  serve  as  i-cent  subsidiary  coins  in  the  new  sys- 
tem. Subsequently,  at  a  suitable  time,  the  Board  should 
announce  that  the  old  copper  coins  were  to  be  regarded  as 
subsidiary  coins  or  to  be  forbidden  to  circulate  altogether. 
The  proposed  method  of  treating  the  old  coins  was 
severely  criticized  by  Liang  C'hi-ch'ao  x  on  the  ground  that 
it  was  silent  about  the  foreign  coins  then  in  the  hands  of 
the  Chinese  people  (estimated  at  over  100,000,000  dollars). 
He  further  contended  that  the  amount  of  provincial  dollars 
was  over-estimated,  and  that  the  Government  ought  to  re- 
deem these  coins  at  their  face  value.  Again,  he  made  the 
point  that  the  dollars  and  the  minor  silver  coins  ought  to 
have  been  separately  treated.  The  only  feasible  and  jus- 
tifiable policy  in  the  withdrawal  of  these  silver  and  copper 
subsidiary  coins,  which  were  all  circulating  at  different 
rates  of  discount  at  different  places,  would  be  for  the  Gov- 
ernment to  exchange  them  for  the  new  coins  within  a  pre- 
scribed period  of  time  at  their  actual  market  values.  Other- 
wise serious  speculations  and  business  disturbances  would 
be  unpreventable. 

1Kuo  Feng  Pao,  see  infra,  p.  141. 


391  ]  CURRENCY  REFORM  I3I 

Special  regulations  were  also  drawn  up  by  the  Board  of 
Finance  for  the  reorganization  of  the  Bank  of  Issue  and  for 
the  issue  of  convertible  banknotes.  Article  3  of  the  Bank 
Regulations  provided  that  the  Bank  should  keep  on  hand 
for  the  redemption  of  the  notes  cash  reserves  of  50  per 
cent  of  the  total  issue;  the  other  50  per  cent  to  be  cov- 
ered by  marketable  securities.  In  addition  to  the  funds  for 
the  note  redemption  the  Bank  was  to  keep  on  hand  a  cash 
reserve  of  25  per  cent  of  deposits  on  current  account  and 
time  deposits  of  under  two  months.  It  was  further  pro- 
vided (Article  6)  that  at  times  of  financial  stringency  in 
the  market  the  Bank  should  issue  notes  in  excess  of  the 
limit  provided  for  in  Article  3,  but  the  approval  of  the 
Board  of  Finance  must  be  first  obtained,  and  on  all  the 
paper  issued  in  excess  of  the  limit  a  tax  of  6  per  cent  per 
annum  must  be  paid,  or  such  rate  as  might  be  determined 
by  the  Board  of  Finance  at  the  time.  In  case  of  over- 
supply  of  the  note  currency,  the  Bank  was  to  be  ordered 
by  the  Board  to  take  measures  to  reduce  the  circulation. 
The  note-issue  privilege  was  to  be  the  Bank's  monopoly. 

Concluding  remarks.  It  looked  as  if  the  reform  was  at 
last  to  be  launched.  Those  who  had  followed  the  course  of 
events  and  appreciated  the  difficulties  of  introducing  the 
gold  standard  seemed  to  be  satisfied  with  the  decision  of  the 
Government  to  introduce  the  national  coinage  system  on  the 
silver  basis  as  the  preliminary  step  of  the  reform.  There 
must  always  be  something  to  debate  about  as  long  as  the 
Government  hesitated  to  act ;  for  each  system  had  its  merits. 
It  is  evident  that  even  if  the  system  was  introduced  on  the 
silver  standard  the  benefits  that  would  be  derived  from  re- 
ducing the  existing  chaos  to  order  would  be  immense.  For 
the  reform  of  the  currency  an  agreement  was  signed  on 
April  15,  191 1,  between  Duke  Tsai  Tze  as  President  of  the 
Board  of  Finance  as  the  first  party,  and  Messrs.  Willard 


l$2  THE  CURRENCY  PROBLEM  IN  CHINA  [392 

Straight  (representing  Messrs.  J.  P.  Morgan  &  Co.,  Kuhn, 
Loeb  &  Co.,  the  First  National  Bank,  and  the  National  City- 
Bank,  all  of  New  York,  constituting  the  American  Group), 
E.  G.  Hillier  (for  the  Hongkong  and  Shanghai  Banking 
Corporation),  H.  Cordes  (for  the  Deutsche-Asiatische 
Bank),  and  MM.  Cazenave  and  Henry  Mazot  (represent- 
ing the  Banque  de  l'lndo  Chine)  as  the  second  party,  au- 
thorizing the  issue  by  the  International  Group  of  a  5-per 
cent  Sinking  Fund  Gold  Loan  of  £10,000,000,  the  issue 
price  to  be  95. 

According  to  the  terms  of  the  agreement,  the  Chinese 
Government  was  to  engage  a  foreign  expert  to  assist  the 
Bureau  of  Currency  Reform.  Dr.  G.  Vissering,  then  Presi- 
dent of  the  Bank  of  Java,  now  President  of  the  Nether- 
lands Bank,  was  accordingly  appointed  by  the  Chinese  Gov- 
ernment as  Monetary  Adviser.  The  loan  was  not  floated 
on  account  of  the  Revolution  in  China.  This  Revolution 
which  broke  out  at  Wuchang  on  October  10,  191 1,  resulted 
in  the  downfall  of  the  Manchu  dynasty  and  the  establish- 
ment of  the  Republican  form  of  government.  The  Na- 
tional Coinage  Act  had  not  become  fully  operative  when 
the  Revolution  began  and  under  the  Republic  the  reform 
policy  has  been  reconsidered.  A  considerable  amount  of 
silver  coins,  the  yuan  and  its  subsidiary  pieces,  has  been  put 
into  circulation,  though  the  definite  amount  is  not  known. 


APPENDIX  I 

Since  the  Revolution,  currency  conditions  have  become 
a  great  deal  worse  than  before  on  account  of  the  issues  by 
the  provincial  and  local  authorities  of  a  large  amount  of 
paper  currency.  The  exact  amount  is  not  accurately 
known,  but  is  estimated  at  approximately  130,000,000 
silver  dollars.  The  paper  has  been  heavily  discounted. 
The  degree  of  depreciation  varies  in  different  places.  The 
paper  currency  is  based  on  the  double  standard,  that  is, 
there  are  silver  as  well  as  cash  notes. 

The  depreciation  is  heaviest  in  Kuangtung  where  the  total 
issue  was  estimated  at  between  $22,000,000  silver  (the  Gov- 
ernment estimate)  and  $12,000,000  (the  estimate  accord- 
ing to  the  provincial  authorities).  In  December,  19 13,  the 
paper  was  being  received  at  43  per  cent  of  its  face  value. 
Kiangsi  is  another  Province  where  the  paper  has  suffered 
heavy  discount.  Silver  has  practically  given  way  to  paper 
and  the  copper  yuan,  and  disappeared.  A  large  amount  of 
the  copper  yuan  has  been  put  into  circulation  during  the  last 
two  years  in  this  Province.  It  was  reported  that  in  191 2  the 
cash  pieces  fluctuated  from  .538  Changsha  taels  per  100  at 
the  beginning  of  January  to  .70  Changsha  taels  per  100  at 
the  end  of  December  and  that  the  rise  in  the  value  of  the 
cash  indicated  the  depreciation  of  the  paper  money  which 
had  meanwhile  displaced  silver.1  The  issue  in  this  Prov- 
ince was  estimated  at  between  $21,000,000  and  $14,694,000. 
Sze-chuan  is  in  a  similar  situation.     Last  December  the 

'  The  China  Rep.,  weekly  ed.,  Aug.  22,  1913. 
3933  133 


134  APPENDIX  I  [394 

paper  dollar  was  exchanged  at  Chentu  for  950  to  1000  cash, 
while  the  silver  dollar  was  at  1300  to  1350.1  The  depre- 
ciation in  the  Manchurian  Provinces  and  Hupei  is  equally 
marked.  Many  attempts  have  been  made  in  different  local- 
ities to  regulate  and  maintain  the  specie  value  of  the  paper 
currency,  but,  as  usual,  these  attempts  have  been  futile. 
The  redemption  of  these  provincial  paper  notes  by  an  issue 
of  uniform  convertible  banknote  currency  is  now  being 
considered.  TheShanghai  Shen  Pao,  gives  the  following 
figures  purporting  to  be  authoritative : 

Anhwei $300,000              Kuangtung   $22,000,000 

Chekiang  2,438,000              Kirin  14,456,000 

Chihli   6,000              Kuangsi  2,186,000 

Fuchien    300,000              Kweichow  1,768,000 

Heilungkiang  2,518,000              Fengtien    5,184,000 

Honan    1,482,000              Sinkiang    2,776,000 

Hunan    10,570,000              Shantung  480,000 

Hupei    30,000,000              Shansi    2,076,000 

Jehol 14,000              Shensi    1,500,000 

Kansu  282,000              Szechuan   11,592,000 

Kiangsi 14,694,000              Yunnan    2,000,000 

Kiangsu  1,124,000                                                

Total  $129,746,000 

Dr.  Vissering,  the  monetary  advisor,  assisted  by  Dr. 
Roest,  acting  as  his  secretary,  made  an  investigation  into 
the  currency  conditions  subsequent  to  his  appointment,  and 
the  results  of  his  investigations  were  embodied  in  a  currency 
reform  plan  which  he  submitted  to  the  Government  late  in 
19 1 2.  Dr.  Vissering' s  views  and  arguments  may  be  briefly 
summarized : 2 

Dr.  Vissering  has  reached  the  conclusion  that  the  gold- 
exchange  standard  is  the  only  feasible  system  for  China 
and  must  be  the  goal  of  the  currency  reform.    But  he  recog- 

1  N.  C.  D.  News,  Dec.  13,  1913. 

2  Dr.  G.  Vissering,  On  Chinese  Currency,  1912. 


395]  APPENDIX  I  I35 

nizes  the  complications  created  by  the  token  money  in  in- 
troducing this  system  in  a  country  with  such  enormous 
extent  of  territory  and  such  divergent  conditions  and  in- 
terests. He  holds  that  "  a  token  coin  can  only  be  issued  by 
a  Government  which  is  powerful  enough  to  prevent  a  ser- 
ious degree  of  counterfeiting  even  in  the  remote  interior 
and  at  the  same  time  defend  its  frontiers  against  the  im- 
portation of  counterfeit  money  from  abroad."  Should  the 
Government  fail  in  either  of  these  respects,  the  introduc- 
tion of  the  gold-exchange  standard  would  be  an  absolute 
failure,  and  the  worst  consequences  would  be  experienced 
if  the  value  of  the  token  money  could  not  be  maintained. 
To  avoid  the  necessity  of  introducing  the  token  coins  at  the 
very  beginning,  Dr.  Vissering  suggests  as  a  practical 
expedient,  a  double  standard  —  not  bimetallism,  but 
two  independent  standards — a  gold-exchange  standard  in 
co-existence  with  the  present  practically  silver  standard,  the 
former  gradually  to  supplant  the  latter  during  the  period 
of  transition,  which  the  plan  provides  for. 

This  plan  is  based  on  the  experiences  of  the  Dutch  East 
Indies  and  can  be  carried  into  effect  without  any  serious  dif- 
ficulties. The  first  step  to  be  taken  for  the  practical  execu- 
tion of  this  plan  would  be  for  the  Government  to  adopt  at 
the  outset  a  theoretical  or  bank  unit  with  a  fixed  value  in 
gold.  The  central  Bank  of  Issue,  which  must  be  strength- 
ened and  operated  on  sound  principles,  may,  as  the  next  step 
in  advance,  issue  notes  on  the  gold  basis,  redeemable  in 
gold  values  abroad,  on  presentation  of  sums  amounting  to 
50,000  units  and  upwards.  The  foreign  gold  reserve,  built 
up  by  the  equivalent  received  against  the  issue  of  these 
notes,  must  be  used  for  no  other  purpose  than  the  main- 
tenance of  the  values  of  these  notes.  As  soon  as  possible, 
at  least  part  of  the  reserve  must  be  brought  back  to  China. 
The  great  advantage  of  adopting  the  fictitious  unit,  ac- 


I36  APPENDIX  I  [396 

cording  to  Dr..  Vissering,  would  be  the  certainty  about  the 
figure  at  which  the  future  real  gold  unit  will  be  adopted, 
thus  preventing  the  speculation  on  the  gold  par  and  on  the 
value  of  silver.  There  is  no  risk  in  following  this  course  of 
action,  and  every  step  in  the  extension  of  this  fictitious 
gold  unit  is  so  much  advantage  gained.  During  this  stage, 
Dr.  Vissering  says,  a  study  may  be  made  of  the  actual  con- 
ditions in  regard  to  the  balance  of  trade  and  of  payment. 

The  next  period  in  the  reform  of  the  currency  begins 
with  the  issue  of  the  token  silver  coins,  and  this  can  be 
begun  as  soon  as  the  Government  is  strong  enough  to  main- 
tain the  gold  value  of  these  coins.  For  the  coinage  ratio 
Dr.  Vissering  suggests  a  gold  ratio  of  21  to  1,  which  is  ap- 
proximately the  same  as  the  rupee,  the  yen  and  the  Philip- 
pine dollar.  The  silver  coin,  provided  for  by  the  Act  of 
May,  191 1,  the  yuan  of  72/100  K'up'ing  tael,  is  consid- 
ered too  large,  and  a  coin  one-third  of  the  K'up'ing  tael  is 
recommended.  Taken  at  28d  per  oz.  standard  (444  grains 
fine)  the  equivalent  of  one-third  K'up'ing  tael  (575.8 
grains,  987  fine,  or  at  1000  fine,  568.3146  grains)  would 
contain  189.4382  grains  of  fine  silver:  the  gold  value  of  the 
unit  expressed  in  silver  at  the  price  of  28c?.  per  oz.  would  be 
11.946553d.  The  gold  sovereign  contains  7.32238  grams 
of  fine  gold.  The  proposed  unit  will  have  a  gold  value  of 
0.3644883  grams  of  fine  gold: — 7.322238 -r- 240  X 
11.946553.  At  the  ratio  of  21  to  1  the  silver  unit  would 
contain  7.6542543  grams  of  fine  silver,  or  a  gross  weight 
of  8.504727  grams,  900  fine.  The  subsidiary  coins  should 
have  more  alloy.  Gold  coins  of  10  and  20  units  may  ulti- 
mately be  coined,  the  former  of  the  weight  of  3.644883 
grams  fine  gold  and  the  latter  of  7.289766  grams. 

The  withdrawal  of  the  old  silver  and  copper  coins  is  the 
third  and  final  stage  of  the  reform.  He  suggests  that  Am- 
sterdam, on  account  of  its  favorable  location  from  a  politi- 


397]  APPENDIX  I  I37 

cal  point  of  view,  may  be  selected  for  the  location  of  the 
gold  reserve  that  is  to  be  kept  abroad. 

It  may  be  well  to  give  Dr.  Vissering's  outline  of  the  pro- 
posed progress  of  the  currency  reform,  as  submitted  to  the 
Republican  Government  for  its  consideration. 

First  Period 

1.  The  very  first  step  must  be  the  adoption  of  a  future  gold 
unit  as  a  foundation  of  the  new  system,  in  order  to  avoid 
speculation  on  the  announcement  of  the  gold  par,  and  also  to 
avoid  having  at  a  later  stage  to  raise  the  new  unit  to  its  future 
nominal  value. 

2.  The  organization  of  a  central  bank  of  issue,  or  otherwise 
the  reorganization  of  the  Ta  Ch'ing  Bank  as  a  central  bank 
for  the  whole  country. 

3.  The  introduction  of  the  new  gold  unit  as  a  money  of  ac- 
count for  book  credits  and  book  transfers. 

4.  Securing  the  co-operation  of  the  foreign  exchange  banks 
and  of  the  private  Chinese  banks  and  bankers  for  the  introduc- 
tion of  the  new  gold  unit  into  their  bookkeeping. 

5.  The  issue  of  banknotes  based  upon  the  new  gold  unit. 

6.  The  accumulation  of  a  gold  reserve  against  the  aforesaid 
banknotes. 

7.  The  regulation  of  the  management  of  this  gold  reserve. 

8.  Eventually  declaring  the  banknotes  legal  tender. 

9.  To  make  a  close  study  of  the  conditions  of  the  balance  of 
trade  and  of  the  balance  of  payment  for  China. 

Second  Period 

10.  The  establishment  of  the  weight,  fineness  and  alloy  of 
the  token  coins  and  of  the  new  subsidiary  coinage,  by  prefer- 
ence in  the  manner  mentioned  on  page  136. 

11.  The  issue  of  these  token  coins  and  subsidiary  coins 
simultaneously. 

12.  The  accumulation  of  a  gold  reserve  against  the  token 
coins  and  the  regulation  of  its  management. 


138  APPENDIX  I  [398 

13.  If  desirable:  the  coinage  and  issue  of  gold  coins,  by 
preference  in  the  manner  mentioned  on  page  136.  Also,  if 
desirable,  the  temporary  admission  of  some  particular  foreign 
gold  coins  as  legal  tender,  and  the  temporary  issue  of  gold  cer- 
tificates. 

14.  The  proclamation  as  unlimited  legal  tender  of : 

a.  the  silver  token  coins  of  1  unit  and  2  units ; 

b.  the  above-mentioned  gold  coins  and  eventually  the 
gold  certificates. 

Third  Period 

15.  The  gradual  withdrawal  and  subsequent  demonetization 
of  the  old  silver  dollars,  as  far  as  necessary  of  the  old  sycee, 
and  of  the  present  copper  cash. 

The  Government,  however,  has  no  desire  to  undertake  the 
task  of  introducing  the  gold  standard  and,  at  the  time  of  this 
writing,  has  just  announced  its  decision  of  introducing  the 
national  coinage  on  the  basis  of  the  silver  standard.  The 
National  Coinage  Act  was  promulgated  by  a  Presidential 
Mandate  on  February  27,  1914,  and  the  text  was  published 
in  the  leading  dailies  of  the  country.  An  English  version 
of  the  text  of  the  Act  is  given  below.  In  many  re- 
spects and  in  general  principles  the  Act  resembles  the  Act 
of  May  24,  191  o.  But  there  are  several  provisions  in  the 
new  Act  that  are  improvements  upon  the  old.  There  is  an 
Article  (Art.  12)  providing  for  free  coinage  of  the  standard 
pieces,  subject  to  a  charge  of  6/1000  of  a  K'up'ing  tael.  In 
other  words,  for  the  yuan  of  648/1000  of  a  K'up'ing  tael 
1000  fine  the  Government  will  charge  654/1000  of  a 
K'up'ing  tael  pure  silver.  This  charge  is  made  on  the 
ground  that,  besides  lessening  the  expenses  of  the  reform, 
it  will  likewise  prevent  melting  down  the  coins.  This 
must  be  regarded  as  a  sound  policy. 

Equally  sound  is  the  provision  for  coining  the  subsidiary 


399]  appendix  I  1 39 

pieces  at  a  much  lower  degree  of  fineness,  whereby  the  ex- 
penses of  recoining  these  minor  pieces  can  be  met  when 
the  system  is  put  on  the  gold  standard  in  the  future.  The 
proposed  method  of  dealing  with  the  old  coins  is  that  for  the 
standard  pieces  the  Government  will  give  the  new  coins  in 
exchange  without  charge,  and  that  the  subsidiary  coins  will 
be  redeemed  at  their  actual  values  according  to  the  local 
market  conditions.  Within  a  prescribed  period  of  time  the 
old  coins  are  to  be  permitted  to  circulate  at  a  fixed  value  in 
the  new  coins  and,  in  the  case  of  the  depreciated  subsidiary 
coins,  it  is  decided  that  the  average  value  of  the  preceding 
month  must  be  taken  in  the  payment  of  public  dues.  The 
withdrawal  of  the  old  coins  is  the  most  difficult  part  of  the 
reform,  and  would  require  most  careful  and  intelligent  hand- 
ling. On  this  point  perhaps  too  much  stress  cannot  be  laid. 
The  following  is  the  text  of  the  Act : 

The  New  National  Coinage  Act  promulgated  by  Presi- 
dential Mandate  * 

i.  The  right  to  coin  and  issue  money  shall  belong  ex- 
clusively to  the  Government. 

2.  The  standard  coin  shall  contain  648/1000  of  a  K'up'ing 
tael  pure  silver  (23.97795048  grams)  and  shall  be  called 
yuan. 

3.  The  different  coins  shall  be  as  follows : 

Silver  coins  :   i-yuan ;  half-yuan  or  5-chiao ;  2-chiao;  i-chiao. 

Nickel  coins :  5-fen. 

Copper  coins:  2-fen;  i-fen;  5-li;  2-li;  i-li. 

4.  The  national  coinage  shall  be  on  the  decimal  basis.  The 
one-tenth  of  one  yuan  shall  be  one  chiao;  the  one-hundredth 
of  one  yuan,  one  fen ;  the  one- thousandth  of  one  yuan,  one  li. 
All  exchanges,  public  or  private,  must  be  at  this  rate. 

1  From  Shih  Pao,  or  Shanghai  Eastern  Times,  translated  by  the 
author. 


140 


APPENDIX  I 


[400 


5.  The  weight  and  fineness  of  the  different  coins  shall  be 
as  follows : 

Gross  weight  Fineness 

The  standard  coin 

yuan ^  of  a  K'up'ingtael.  .90%  silver,  10%  copper. 

Half -yuan,    or 

•■70%  silver,  30%  copper. 

•  .70%  silver,  30%  copper. 
..70%  silver,  30%  copper. 
..25%  nickel,  75%  copper. 

•  .95 %  copper,  4%  zinc,  1%  lead. 


2-chiao   iWff 

i-chiao    TUrs 

5-fen    jV 

2-fen    T20V 

i-fen    j\% 

5-H  

2-li  

i-N  tH* 


TOOTJ 


6.  There  shall  be  no  limitation  upon  the  use  of  the  stand- 
ard coin.  The  5-chiao  coins  may  not  be  offered  in  excess  of 
20  yuan  in  any  one  payment.  The  2-chiao  and  i-chiao  coins 
may  not  be  offered  in  excess  of  5  yuan  in  any  one  payment. 
The  nickel  and  copper  subsidiary  coins  may  not  be  offered 
in  excess  of  1  yuan  in  any  one  payment.  These  limitations 
do  not  apply  to  the  Government  Bank  in  the  exchange  of 
coins  or  the  Government  offices  in  the  payment  of  public  dues. 

7.  The  exact  forms  of  the  different  coins  will  be  deter- 
mined by  subsequent  Presidential  Mandate. 

8.  No  coin  of  any  denomination  may  differ  from  the  legal 
weight  by  more  than  3/1000.  1000  coins  weighed  together 
must  not  differ  by  more  than  3/10,000  from  the  legal  weight. 

9.  The  fineness  of  the  different  silver  coins  must  not  differ 
from  the  legal  standard  by  more  than  3/1000. 

10.  When  the  standard  coin  has  been  so  abraded  by  cir- 
culation and  use  that  its  weight  has  fallen  by  1  per  cent, 
and  when  the  subsidiary  coins,  whether  of  silver,  nickel,  or 
copper,  of  5-chiao  and  under,  have  lost  by  abrasion  5  per  cent 
of  their  legal  weight,  they  may  be  taken  to  the  Government 
offices  to  be  exchanged  for  new  coins. 


401]  APPENDIX  I  I4I 

ii.  No  one  shall  be  compelled  to  accept  mutilated  coins 
when  the  mutilation  can  be  shown  to  be  intentional. 

12.  When  silver  bullion  is  presented  by  indivduals  for 
coinage  at  the  mints  the  Government  must  consent  to  give 
coins  at  a  charge  of  6/1000  of  a  K'up'ing  tael  a  piece. 

13.  The  date  when  this  Act  shall  be  effective  will  be  de- 
termined by  Presidential  Mandate. 

Mr.  Liang  C'hi-ch'ao,  until  lately  Minister  of  Justice,  has 
been  appointed  Director-General  of  the  Currency  Depart- 
ment. For  the  first  time  a  competent  single  official  has  been 
put  in  charge  of  the  execution  of  the  reform,  in  place  of  the 
usual  Commissions  and  Boards,  and  sometimes  the  entire 
Government.  On  account  of  this  divided  responsibility  re- 
form often  ended  with  the  drafting  of  the  program.  In  all 
probability  the  reform  will  be  launched  as  soon  as  political 
conditions  become  fairly  settled,  and  enough  funds  are  ob- 
tained. The  Ministry  of  Finance  has  lately  been  negotia- 
ting to  this  end. 


APPENDIX  II 
The  Regulations  of  November  19,  1905  1 

1.  The  new  silver  currency  should  be  purer  in  quality  than 
the  dollars  heretofor  coined  in  various  provinces  and  the 
standard  unit  of  value  must  be  heavier  to  be  suitable  as  a 
national  coin.  The  purest  silver  in  circulation  in  China 
to-day  is  shown  by  chemical  analysis  to  contain  not  more 
than  98  or  99  per  cent  of  pure  silver,  but  a  deduction  of 
two  or  three  per  cent  should  be  allowed  in  minting  the  new 
coin  to  cover  the  cost  of  coinage,  and  it  is  proposed  to  make 
the  new  tael  of  nine  mace  six  candareens  of  pure  silver, 
mixed  with  one  mace's  weight  of  pure  copper,  to  be  fixed 
as  the  equivalent  of  one  K'up'ing  tael  of  full  touch. 

The  fractional  currency  shall  consist  (a)  of  a  piece  con- 
taining four  mace  eight  candareens'  weight  of  K'up'ing 
silver  mixed  with  five  candareens'  weight  of  pure  copper 
which  shall  be  declared  the  equivalent  of  five  mace  K'up'ing 
silver  full  touch;  (b)  a  piece  of  one  mace  seven  candareens' 
weight  of  K'up'ing  silver  mixed  with  three  candareens  of 
pure  copper,  to  be  the  equivalent  of  two  mace  K'up'ing 
silver  of  full  touch;  and  (c)  a  piece  of  the  weight  of  eight 
candareens  five  li  of  pure  K'up'ing  silver  mixed  with  one 
candareen  five  li  of  pure  copper,  as  the  smallest  piece,  to  be 
the  equivalent  of  one  mace  of  K'up'ing  silver,  full  touch. 
It  is  also  decided  that  in  every  ten  pieces  minted  four  shall 

1  In  the  Report  of  the  Director  of  the  Mint  of  the  U.  S.,  1906, 
pp.  198-200.  Translation  made  by  Mr.  E.  T.  Williams,  of  the  Ameri- 
can Legation,  Peking. 

142  [402 


403]  APPENDIX  II  I43 

be  of  one  tael's  value  and  two  of  the  denomination  of  five 
mace,  two  of  two  mace  and  two  of  one  mace.  This  shall 
be  the  rule,  but,  if  there  shall  be  a  demand  for  a  larger  pro- 
portion of  any  particular  denomination,  orders  shall  be  is- 
sued to  make  a  careful  investigation  as  to  the  real  amount 
(in  circulation)  and  report  upon  the  matter  to  the  Financial 
Commission  and  the  Board  of  Revenue,  who  shall  consult 
together  and  make  reply,  and  only  if  they  consent  may  the 
additional  amount  be  minted.  As  to  these  coins  the  central 
and  branch  mints  must  make  them  exactly  of  the  same 
weight  and  fineness,  and  assay  and  inspection  must  be 
made  according  to  the  rules  for  the  regulation  of  the  coin- 
age already  submitted  by  us  and  approved  by  the  Throne. 

2.  The  i-tael  coin  shall  be  equal  to  two  5-mace  coins  or 
five  2-mace  coins,  or  ten  i-mace  coins.  The  small  frac- 
tional coins  of  less  than  five  mace  shall  exchange  among 
themselves  at  this  rate,  and  in  all  monetary  transactions, 
public  or  private,  they  must  be  paid  out  and  received  at  this 
rate;  under  no  circumstances  may  a  discount  be  charged. 
Any  disobedience  will  be  punished  according  to  law. 

3.  The  i-tael  coin  being  the  standard  monetary  unit, 
there  shall  be  no  limit  to  its  circulation.  The  5-mace  and 
other  fractional  silver  pieces  shall  be  legal  tender  in  every 
transaction  to  the  amount  of  ten  taels,  i.  c,  to  the  value  of 
ten  of  the  i-tael  coins.  They  must  not  be  used  to  pay  in 
full  amounts  over  ten  taels,  and  if  offered  they  may  be  re- 
fused in  amounts  over  the  sum  specified.  The  rate  of  ex- 
change between  the  copper  coins  and  the  silver  and  the  limit 
of  circulation  of  the  former  will  be  determined  after  the 
provincial  authorities  have  complied  with  the  regulations 
already  submitted,  by  which  they  are  required  to  investigate 
and  report  to  the  Board  of  Revenue  the  facts  as  to  the  circu- 
lation of  copper  coins. 

4.  As  to  the  minting  of  the  silver  coins,  it  is  proposed 


144  APPENDIX  II  [404 

that,  the  Board  of  Revenue  having  been  ordered  to  coin, 
the  central  mint  will  coin  several  million  pieces  and  send 
them  to  the  bank,  and  the  Board  of  Revenue  shall  send  dies 
to  the  provincial  mints  of  Chili,  Kiangsu,  Hupeh  and  Kuang- 
tung,  which  shall  at  the  same  time  mint  several  million 
pieces,  whereupon  the  bank  of  the  Board  of  Revenue  shall 
print  paper  money  to  the  full  amount  of  the  silver  coins 
minted  and  fix  a  date  upon  which  it  shall  be  put  into  circu- 
lation. After  its  issue  the  Treasury  of  the  Board  of  Reve- 
nue and  the  treasuries  of  the  provinces  mentioned  shall 
first  receive  it  in  a  fixed  proportion,  and  thereafter  all  the 
provinces,  the  railways,  the  (China  Merchants)  Steamship 
Company,  and  the  Telegraph  Administration  shall  receive 
it  in  the  same  proportion.  There  must  be  no  discrimination 
against  it  by  the  said  official  companies  on  the  ground  that 
it  is  not  issued  in  their  provinces.  The  method  of  arrang- 
ing the  proportions  shall  be  to  fix  the  proportion  payable  in 
silver  coins  and  that  payable  in  paper  money  of  the  bank  of 
the  Board  of  Revenue,  and  for  the  present  the  remainder 
may  be  paid  in  other  silver — that  is,  in  lump  silver  or  the 
old  dollars — but  afterwards  as  the  coinage  of  the  new  pieces 
increases  in  amount  the  proportion  payable  in  this  may  be 
increased  until  finally  payments  will  be  made  entirely  in  the 
new  silver  coins.  We  request  that  orders  be  issued  to  all 
the  Tartar  generals,  viceroys,  and  governors,  as  well  as  to 
the  superintendent  of  railways,  of  the  China  Merchants 
Steam  Navigation  Company,  and  the  Telegraph  Adminis- 
tration to  comply  with  this  regulation. 

5.  All  provincial  taxes  levied  in  K'up'ing  taels  shall  be 
payable  in  the  same  amount  of  the  new  tael  coins.  The  col- 
lectors should  have  salaries  definitely  fixed,  i.  e.,  not  be  al- 
lowed to  make  their  living  by  charges  for  exchange,  etc.,  as 
heretofore.  Aside  from  the  legal  charge  of  meltage,  no 
other  charge  shall  be  added  to  the  sum  levied  under  the 


405]  APPENDIX  II  I45 

name  of  "  assaying  charges,"  etc.  All  other  moneys  here- 
tofore collected  or  paid  in  taels  of  another  scale  shall  be 
converted,  according  to  the  value  of  the  tael  used,  into  their 
equivalent  in  K'up'ing  taels  of  full  touch,  and  the  conver- 
sion having  once  been  made,  these  sums  shall  forever  here- 
after be  receivable  and  payable  in  that  amount  of  the  new 
i -tael  coins,  and  no  variation  from  the  rule  will  be  allowed. 
We  have  also  to  request  that  orders  be  issued  to  all  the  pro- 
vincial authorities  to  comply  with  this  rule. 

6.  As  China  is  now  entering  into  new  commercial  treat- 
ies with  the  various  foreign  powers  which  provide  for  the 
adoption  of  a  uniform  national  coinage  which  the  merchants 
of  foreign  nationalities  residing  in  China  shall  use,  it  be- 
comes necessary  to  request  that  the  Board  of  Foreign  Af- 
fairs be  instructed  that  at  the  time  of  the  issue  of  the  new 
coinage  dispatches  must  be  sent  to  the  various  foreign  min- 
isters and  to  the  consuls  at  the  various  treaty  ports  and 
notifications  made  to  the  commissioners  of  customs  that 
they  may  all  hereafter  uniformly  use  the  new  coins.  The 
customs  duties  have  heretofore  been  levied  and  collected  in 
Haikwan  taels,  and  orders  must  be  issued  to  the  commis- 
sioners of  customs  thereafter  in  accordance  with  the  provi- 
sions of  the  commercial  treaties  to  convert  the  duties  levied 
in  Haikwan  taels  into  their  equivalent  in  K'up'ing  taels  and 
collect  accordingly. 

7.  On  the  day  when  the  new  coins  are  put  into  circulation 
the  viceroys  and  governors  of  the  various  provinces  must 
issue  instructions  to  the  local  authorities  to  put  out  procla- 
mations informing  the  merchants  and  all  people  that  what- 
ever accounts  they  may  have,  old  or  new,  and  whatever 
commercial  transactions  may  take  place  in  the  markets,  the 
original  amounts,  according  to  the  value  of  the  taels  in 
which  they  may  be  reckoned,  must  be  converted  to  their 
equivalents  in  K'up'ing  taels  of  full  touch,  and  paid  in  that 


146  APPENDIX  II  [4o6 

amount  of  the  new  silver  coins,  and  such  payment  may  not 
be  refused. 

8.  As  all  viceroys,  governors,  other  officials,  merchants, 
soldiers  and  common  people  in  all  the  provinces  must  use 
the  new  coins,  all  may  send  their  silver  to  be  minted,  and 
the  central  mint  and  the  branch  mints  at  Tientsin,  Nanking, 
Wuchang  and  Canton  will  coin  it  for  them.  Every  tael  of 
K'up'ing  silver  of  full  touch  will  be  refined  to  pure  silver 
0.985  fine,  or  finer,  in  return  for  which  (0.985  tael)  they 
will  receive  one  of  the  new  tael  dollars.  Fractional  coins 
of  the  denomination  of  five  mace,  two  mace,  and  one  mace 
will  also  be  minted  for  them  in  the  proportions  set  forth 
above. 

The  excess  in  the  fineness  of  the  silver  will  pay  the  cost 
of  minting,  and  thus  there  will  be  nothing  to  make  good  on 
either  side. 

Silver  of  inferior  quality,  foreign  silver  coins,  and  the 
silver  dollars  heretofore  minted  in  the  various  provinces 
may  also  be  sent  in  to  be  reminted,  the  amount  of  the  new 
coins  given  in  exchange  being  determined  by  the  amount 
of  pure  silver  contained — that  is,  their  value  will  be  deter- 
mined in  K'up'ing  taels  of  full  touch,  and  new  coins  issued 
accordingly. 

9.  When  the  new  coins  are  first  issued  and  the  people 
are  unfamiliar  with  them,  there  will  almost  surely  be  at- 
tempts made  among  the  merchants  in  exchanging  them  to 
discriminate  against  them  (boycott  them),  or  to  discount 
them.  The  Bank  of  the  Board  of  Revenue,  the  customs 
banks  in  the  various  provinces,  and  other  official  banks 
and  cash  shops  must  be  charged  with  the  responsibility  of 
seeing  that  any  one  bringing  the  new  silver  coins  to  ex- 
change for  paper  money,  bullion,  or  copper  coins,  or  de- 
siring to  exchange  paper  money,  silver  bullion,  or  copper 
coins  for  the  new  silver  coins,  shall  receive  just  treatment 


407]  APPENDIX  II  I47 

on  the  basis  of  one  K'up'ing  tael  being  the  equivalent  of  one 
tael  in  the  new  coinage.  There  must  be  no  extortion.  Or- 
ders must  be  given  also  to  investigate  the  markets,  and  if 
any  mercantile  firms  are  found  raising  or  lowering  the  rate 
of  exchange  at  their  own  pleasure,  report  shall  be  made  for 
cases  in  Peking  to  the  Financial  Commission  and  to  the 
Board  of  Revenue,  and  for  the  provinces  to  the  Tartar  gen- 
erals, viceroys,  and  the  governors  concerned,  who  shall  in- 
vestigate and  severely  punish  the  offence,  so  as  to  enforce 
the  coinage  regulations. 

10.  These  regulations  must  be  published  in  the  official 
gazettes  for  the  information  of  the  people,  and  we  have  to 
request  that  orders  be  issued  to  the  Tartar  generals,  vice- 
roys and  governors  of  the  various  provinces  that  at  the  time 
when  the  new  coins  are  issued  they  must  instruct  the  de- 
partment and  district  magistrates  to  print  these  regulations 
in  large  characters  in  proclamations  which  must  be  posted 
in  all  the  cities,  villages,  and  market  towns  of  their  jurisdic- 
tions, that  the  people  on  seeing  the  same  may  become  thor- 
oughly acquainted  with  the  matter,  and  thus  the  yamen 
clerks  may  be  kept  from  cheating  them. 


APPENDIX  III 

Regulations  for  the  National  Coinage  of  May  24, 
19101  (with  Original  Explanatory  Notes) 

Article  I.  The  monetary  unit  of  the  Ta  Ch'ing  Empire 
shall  be  called  the  dollar  (yuan).2 

Art.  2.    The  different  coins  shall  be  as  follows : 

Silver  coins:  (1)  One-dollar  coins;  (2)  fifty-cent  coins; 
(3)  twenty-five  cent  coins ;  (4)  ten-cent  coins. 

Nickel  coins:  (1)  Five-cent  coins. 

The  coinage  of  this  nickel  coin  will  be  delayed  pending 
an  investigation  into  mines  and  methods  of  mintage. 

Copper  coins:  (1)  Two-cent  coins;  (2)  one-cent  coins; 
(3)  five-mill  coins;  (4)  one-mill  coins. 

The  coinage  of  the  one-cent  copper  coins  will  be  post- 
poned, owing  to  the  danger  of  their  being  confounded  with 
the  ten-cash  coins  formerly  minted. 

Art.  3.  The  dollar  (yuan)  will  be  the  standard  coin,  and 
the  coins  from  the  fifty  cents  and  under  will  be  considered 
subsidiary  coinage,  and  will  be  in  the  decimal  system.  One 
dollar  will  be  ten  dimes.  One  dime  will  be  ten  cents.  One 
cent  will  be  ten  mills.    All  exchanges  must  be  at  this  rate. 

Art.  4.  The  weight  and  fineness  of  the  silver  coins  will 
be  as  follows :  The  weight  of  one  dollar  will  be  seventy- two 

1  In  U.  S.  Mint  Report,  191 1,  pp.  236-8.     Translation  by  Dr.  C.  D. 
Tenney,  of  the  American  Legation,  Peking. 

2  The  monetary  unit  means  that  used  in  computations  above  unity. 
Below  unity  the  reckoning  is  decimal. 

148  [408 


409]  APPENDIX  III  I49 

hundredths  of  a  K'up'ing  tael,  and  the  fineness  ninety  per 
cent,  amounting  to  six  hundred  and  forty-eight  thousandths 
of  a  tael  of  silver. 

The  weight  of  the  fifty-cent  pieces  will  be  thirty-six 
hundredths  of  a  K'up'ing  tael  and  eighty  per  cent  fineness, 
amounting  to  two  hundred  and  eighty-eight  thousandths  of 
a  tael  of  silver. 

The  weight  of  the  twenty-five  cent  piece  will  be  eighteen 
hundredths  of  a  K'up'ing  tael,  and  the  fineness  eighty  per 
cent,  amounting  to  one  hundred  and  forty-four  thousandths 
of  a  tael  of  silver. 

The  weight  of  the  ten-cent  piece  will  be  864/10000  of  a 
K'up'ing  tael,  and  the  fineness  sixty-five  per  cent,  so  contain- 
ing 56 1 6/ 1 00000  of  a  tael  of  silver. 

The  weight  and  fineness  of  the  nickel  and  copper  coins 
will  be  determined  later.1 

Art.  5.  There  will  no  limitation  in  the  use  of  the  standard 
dollar. 

The  subsidiary  silver  coins  may  not  be  offered  in  excess 
of  five  dollars'  worth  in  any  one  payment.  The  nickel  and 
copper  subsidiary  coins  may  not  be  offered  in  excess  of  half 
a  dollar's  worth  in  any  one  payment. 

Payment  of  the  subsidiary  coins  in  excess  of  the  above 
amounts  may  be  refused,  but  this  does  not  apply  to  the  Ta 
Ch'ing  Bank  or  any  of  its  branches  in  the  exchange  of 


1  In  these  regulations  the  "  K'u-p'ing  tael "  refers  to  the  K'u-p'ing 
tael  as  determined  in  response  to  the  joint  memorial  of  the  Board  of 
Agriculture,  Industry,  and  Commerce,  and  the  Board  of  Finance  in 
regard  to  uniform  weights  and  measures.  Therein  it  was  specified 
that  the  K'u-p'ing  tael  would  be  reckoned  as  equivalent  to  thirty- 
seven  and  three  hundred  and  one  one- thousandths  (37.301)  grams  by 
the  French  metric  system.  The  silver  referred  to  is  to  be  absolutely 
pure  silver. 

8  Therefore   in   all   financial   operations   the   dollar   will    be   current, 


150  APPENDIX  III  [4IO 

Art  6.  On  one  face  of  the  silver  dollar  will  be  a  dragon 
and  on  the  other  face  the  characters  "  Ta  Ch'ing  Silver 
Coin,  One  Dollar."  The  subsidiary  coins  of  silver,  nickel, 
and  copper  will  be  minted  on  the  same  general  model.1 

Art.  7.  No  dollar  may  differ  from  the  legal  weight  by 
more  than  two  one-thousandths  of  a  K'up'ing  tael.  One 
thousand  coins  weighed  together  must  not  differ  more  than 
three  one-thousandths  of  the  legal  weight.2 

Art.  8.  The  fineness  of  silver  coins  must  not  differ  from 
the  legal  standard  more  than  three  one-thousandths.3 

Art.  9.  When  a  dollar  coin  has  been  so  abraded  by  use 
that  its  weight  has  fallen  below  seventy-one  one-hundredths 
tael,  and  when  the  fractional  coins,  whether  of  silver, 
nickel,  or  copper,  of  fifty  cents  and  under,  show  signs  of 

whether  the  transactions  are  in  tens,  hundreds,  thousands,  or  tens  of 
thousands.  The  purpose  in  minting  the  subsidiary  coins  is  to  provide 
for  small  transactions  in  trade  and  for  reckoning  change;  so  the  limit 
for  the  use  of  them  must  be  clearly  defined.  But  exchanging  coins 
and  using  them  are  different,  and  therefore  there  is  no  limit  in  matters 
of  exchange.  So  the  subsidiary  coinage  is  protected  and  the  people's 
confidence  in  it  will  not  be  impaired.  If  it  be  found  that  the  absence 
of  a  limitation  in  the  matter  of  exchanging  coins  will  lead  to  the 
banks  receiving  large  amounts  of  the  subsidiary  coins  so  that  they 
cannot  avoid  offering  temptation  to  counterfeiters,  it  should  be 
remembered  that  there  is  a  fixed  limit  to  the  number  of  subsidiary  coins 
that  may  be  minted  and  those  who  care  to  exchange  them  will  naturally 
be  few.  Also  there  is  a  regular  medium  of  exchange  so  that  the 
counterfeiting  may  be  easily  discovered.  So  no  fear  need  be  enter- 
tained on  this  score. 

1  The  exact  forms  of  the  silver,  nickel,  and  copper  coins  will  be  sent 
to  all  the  Provinces. 

2  In  enforcing  the  first  and  second  parts  of  this  article  some  liberality 
may  be  shown  in  reckoning  and  passing  single  silver  dollars,  but  the 
reckoning  by  thousands  will  be  strictly  observed. 

*  Differences  in  weight  in  numbers  of  coins  will  be  determined  ac- 
cording to  the  provisions  of  the  last  Article,  but  differences  in  fine- 
ness according  to  this  Article. 


4II]  APPENDIX  III  151 

abrasion,  they  may  be  taken  to  the  mint  or  to  the  Ta  Ch'ing 
Bank  to  be  exchanged  for  new  coins.1 

Art.  10.  No  one  can  be  compelled  to  accept  mutilated 
coins,  when  the  mutilation  can  be  shown  to  be  intentional.2 

Art.  ii.  The  Board  of  Finance  will  fix  the  limit  for  the 
amount  of  coinage  of  the  subsidiary  coins.3 

Sup  piemen  tary  A  r  tides 

Art.  12.  The  Ta  Ch'ing  Bank  will  appoint  a  special  offi- 
cial to  control  carefully  all  matters  connected  with  the  ex- 
changing of  coins,  both  old  and  new.4 

Art.  13.  During  the  introductory  period  of  issuing  the 
new  coins,  one  dollar  and  fifty  cents  will  be  reckoned  as  one 
tael  of  the  Board  of  Finance  Treasury  weight,  standard 
silver.6 

Art.  14.  In  places  where  the  new  coins  have  been  issued, 
the  large  and  small  coins  previously  minted  may  continue 
to  circulate  temporarily  at  their  market  value.  On  the  one 
hand,  the  Government  mints  and  the  Ta  Ch'ing  Bank  will 

1  Silver  coins  used  in  trade  cannot  fail  to  be  abraded,  therefore  the 
limit  of  seventy-one  one-hundredths  teal  will  be  set  for  abrasion. 
When  this  limit  of  abrasion  is  exceeded  the  coins  must  be  exchanged 
to  secure  confidence. 

2  The  last  Article  provides  for  the  exchange  of  coins  abraded  by  use, 
and  this  Article  forbids  the  exchange  of  coins  deliberately  mutilated, 
in  order  to  prevent  the  people  from  boring  holes,  affixing  stamps,  or 
grinding  off  the  coins. 

s  The  coinage  of  the  subsidiary  coins  must  be  limited,  and  they  must 
not  be  issued  in  excessive  quantities  to  avoid  injuring  their  currency 
as  subsidiary  coins. 

4  The  exchanging  of  the  old  and  new  coins  is  the  special  business  of 
the  bank,  but  since  the  business  of  the  bank  is  complicated,  a  special 
bank  officer  will  be  deputed  to  control  this  department  so  that  it  may 
be  properly  managed. 

5  This  Article  fixes  the  exchange  value  of  the  new  and  old  money 
and  the  standard  for  discounting.  By  standard  silver  is  meant  silver 
of  nine  hundred  and  eighty-five  one-thousandths  fineness. 


1 52  APPENDIX  III  r4I2 

gradually  withdraw  them  at  the  market  rate  to  be  reminted 
into  the  new  coinage;  and  on  the  other  hand,  the  Board  of 
Finance  will  take  all  the  circumstances  into  consideration, 
and  fix  a  limit  of  time  for  this  to  continue.  After  the  time 
fixed,  all  such  circulation  will  cease,  and  the  mints  and  the 
Ta  Ch'ing  Bank  will  exchange  the  old  coins  as  silver  bullion. 

Art.  15.  The  copper  coins  previously  minted  in  the  Prov- 
inces will  continue  to  circulate  at  their  market  value  and 
the  Board  of  Finance  will  regulate  this  matter  in  accordance 
with  circumstances.1 

Art.  16.  After  the  regulations  have  been  approved  by 
imperial  rescript,  a  limit  of  one  year  will  be  granted  within 
which  period  all  regular  official  receipts  and  disbursements 
will  be  converted  into  Treasury  taels  of  standard  silver  and 
then  reckoned  in  the  new  monetary  unit.2 

Art.  17.  A  limit  of  one  year  will  be  fixed  after  the  date 
of  the  imperial  sanction  of  these  regulations,  and  within 
this  time  all  official  receipts  and  disbursements  regularly 
made  in  copper  cash  or  silver  shall  be  reckoned  in  Treasury 

1  In  regard  to  the  method  of  treating  the  old  coinage  as  laid  down 
in  Articles  14  and  15,  the  Board  of  Finance  will  determine  a  special 
method  of  treatment  after  considering  the  conditions  and  will 
memorialize  the  throne  on  the  subject. 

3  In  order  to  unify  the  currency  system  ail  accounts  and  public  docu- 
ments will  first  use  the  new  monetary  denominations.  This  is  to 
hasten  the  adoption  of  the  new  monetary  unit,  and  the  resulting  ad- 
vantages in  making  and  auditing  the  budgets  will  be  many.  Therefore 
before  the  new  coins  have  been  issued  there  is  no  difficulty  about  fix- 
ing a  limit  of  time  within  which  the  new  terminology  shall  replace  the 
old.  So  if  the  former  reckoning  in  taels  is  changed  to  dollars  it 
will  not  be  troublesome  to  use  the  ratio  of  exchange  laid  down  in 
Article  13.  Therefore  fixing  a  year  as  the  limit  for  the  change  is  not 
too  rapid.  If  it  is  found  that  the  new  coins  will  not  be  immediately 
sufficient  for  use  till  after  the  change  of  name,  the  silver  bullion  and 
old  coins  may  continue  to  be  used  and  the  actual  receipts  and  dis- 
bursements may  be  reckoned  in  Treasury  taels  of  standard  silver  and 
then  reckoned  in  the  national  coin.    This  will  cause  no  inconvenience. 


4I3]  APPENDIX  III  153 

taels  and  thence  converted  into  national  dollars.  In  cases 
where  silver  dollars  or  other  coins  have  hitherto  been  used, 
the  same  method  shall  be  followed.1 

Art.  1 8.  All  customs,  postal,  telegraph,  steamer,  and 
railway  accounts  shall  be  tendered  in  the  national  coinage 
after  being  first  changed  into  Treasury  taels  by  the  heads  of 
the  offices  concerned  according  to  the  weights  and  purity 
of  the  money  received  or  disbursed,  within  one  year  of  the 
time  when  these  regulations  receive  the  imperial  sanction.2 

Art.  19.  All  debts  of  the  common  people  which  are  reck- 
oned in  silver  shall  be  reckoned  in  Treasury  taels  according 
to  the  weight  and  fineness  of  silver  in  the  locality  concerned 
and  then  reckoned  in  the  national  coinage.  When  they  are 
reckoned  in  the  old  silver  dollars,  copper-minted  coins,  cop- 
per cash,  or  any  other  kind  of  money  they  shall  be  reckoned 
in  Treasury  taels  according  to  the  market  rate  for  the  place, 
fixed  by  decree  on  memorial  as  provided  in  these  regula- 
tions, and  then  reckoned  in  the  national  coinage.  In  all 
cases,  in  which  the  documents  have  not  been  reckoned  in  the 
national  coinage,  as  laid  down  in  this  Article,  if  there  shall 
be  any  litigation,  judgment  shall  be  given  according  to  the 
rate  for  the  day  fixed  by  edict,  on  memorial,  as  prescribed 
in  these  regulations.3 

1  In  changing  the  unit  of  reckoning  according  to  this  Article,  public 
accounts  and  documents  shall  be  first  changed  and  the  market  rate  for 
the  day  fixed  by  the  throne,  on  memorial,  shall  be  used  in  order  to 
prevent  brokers  from  lowering  or  raising  the  exchange  and  to  avoid 
dispute  about  exchange.  The  method  of  carrying  out  this  provision 
shall  be  for  the  Board  of  Finance  to  telegraph  to  every  Province, 
obtaining  the  market  rates  for  all  sorts  of  silver  money  in  every  fu, 
ting,  chou,  and  hsien,  which  the  Board  will  publish  in  every  locality. 

'  Since  the  large  customs  accounts  and  the  communication  accounts 
have  an  important  influence  upon  currency,  they  should  be  first 
changed  so  as  to  promote  the  use  of  the  new  currency. 

3  The  different  kinds  of  money  alluded  to  in  this  Article  and  Article 
17  are  the  Tientsin  "  ching  ch'ien"  Hsinchiang  "hung  ch'ien,"  and 
other  such  coins. 


154  APPENDIX  III  [4I4 

Art.  20.  From  the  date  when  these  regulations  receive 
the  imperial  sanction,  all  mintage  of  large  and  small  silver 
and  copper  coins  in  the  Provinces  shall  cease. 

Art.  21.  The  Board  of  Finance  will  establish  an  assay 
office  and  engage  an  expert  to  take  charge  of  it.  Specimen 
coins  will  be  taken  from  the  coins  minted  by  the  mints, 
which  shall  be  assayed  and  the  analysis  will  be  published.1 

Art.  22.  Throughout  the  Ta  Ch'ing  Empire  when  the  Ta 
Ch'ing  national  coins  are  offered  in  payment,  no  matter 
who  the  person  may  be  or  what  the  account  may  be,  the 
national  money  may  not  be  refused.2 

Art.  23.  Any  one  who  violates  the  provisions  of  Article 
3  or  Article  22  may  be  accused  in  court  by  the  person  con- 
cerned. After  conviction  a  fine  of  from  $10  to  $1,000  will 
be  inflicted.8 

Art.  24.  If  these  regulations  require  alteration,  the  Board 
of  Finance  will  memorialize  the  Throne  publicly  thereon. 

1  The  coins  selected  will  be  either  from  those  already  in  circulation 
or  from  those  just  minted,  and  the  analysis  will  be  for  the  purpose 
of  maintaining  confidence. 

2  This  article  defines  the  legal-tender  quality  of  the  national  coins, 
and  is  in  accordance  with  the  regulations  of  all  countries. 

3  Violating  Article  3  means  forcing  one  to  discount  coins,  so  inter- 
fering with  the  decimal  value  of  the  subsidiary  coins.  Violating 
Article  22  means  that  when  the  national  currency  is  offered  one  re- 
fuses to  accept  it. 


APPENDIX  IV 

Gold  Price  of  Bar  Silver 

highest,  lowest,  and  average  price  of  bar  silver  in  london,  per  ounce 

british  standard  (0.925),  and  the  equivalent  in  u.  s.  gold  coin 

of  an  ounce  iooo  fine,  taken  at  the  average  price,  since  187i 

:  Highest  Lowest  Average        Value  of  a  fine  ounce 

quotation  quotation  quotation         at  average  quotation 

d.  d.  d. 

1871  61          60  3/16  6oy2  $1,326 

1872  62T/8                      59%  60  5/16  1.322 

1873  59  15/16      577A  59  3/i6  1.29769 

1874  59^         57JA  58  5/16   .  1.27883 

1875  57H                      55*2  56  n/16  1.24233 

1876  58^         46M  53Vs  1.16414 

1877  &lA                      S3lA  54  13/16  1.20189 

1878  55JA                      49^  52^  I.I5358 

1879  S33A                      Wz  5154  1.12392 

1880  52  13/16      51^  5234  1.14S07 

1881  52%         50%  51^  1.13229 

1882  52^         50  51  13/16  1. 13562 

1883  51  3/16       50  1/16  50  9/16  1.10874 

1884  5i^         49/4  50  11/16  1.11068 

1885  50          46%  48  9/16  1. 065 10 

1886  47          42  45^  .99467 

1887  47l/s                      43XA  44  "/16  .97946 

1888  44  9/16  41  y8  42%  -93974 

1889  44^         4i  15/16  42  n/16  .93511 

1890  545A  435A  47M  1.04634 

1891  4834         43H  45  1/16  .98800 

1892  43H                      37%  39H  .87145 

1893  38$4         30^  35  9/i6  .78030 

1894  3iM  27  2815/16  .63479 

1895  3iH  27  3/16  29  13/16  .65406 

1896  31  15/16  2954  30  13/16  .67565 

1897  29  13/16  2zVs  27  9/16  .60438 

1898  28^         25  26   15/16  .59010 

1899  29          26^  27  7/16  .60154 

415]  155 


'56 

APPENDIX  IV 

[416 

Highest 

Lowest 

Average 

Value  of  a  fine  ounce 

quotation 

quotation 

quotation 

at  average  quotation 

d. 

d. 

d. 

igoo   .. . 

...  3oy4 

27 

28  5/16 

.62007 

iqoi    . . . 

. . .  29  9/16 

24  15/16 

27  3/16 

•59595 

1902   . . . 

. . .  26 1/16 

21  11/16 

24  1/16 

.52795 

1903   ••- 

...  28^ 

21  11/16 

24Ya 

.54257 

1904   ... 

. . .  28  9/16 

24  7/i6 

26   13/32 

.5/876 

1905   ••• 

. . .  30  5/16 

25  7/16 

27    I3/l6 

.61027 

1906   .. . 

...  33lA 

29 

30% 

.67689 

1907   ... 

•  •  •  37  7/i6 

2434 

30  3/l6 

.66152 

1908  ... 

...27 

22 

24   13/32 

•53490 

1909   ... 

...  24% 

23  1/16 

23  23/32 

.52016 

1910   . . . 

...  26^ 

23  3/i6 

24  21/32 

.54077 

1911  ... 

1912  ... 

1913  ••• 

24.592 
28.842 
27.576 

.53304 
.60835 
.59791 

VITA 


The  author  was  born  in  Mi-yun  Hsien  near  Peking, 
China,  August  i,  1888.  He  was  prepared  for  college  in 
the  Peking  University  Preparatory  College  and  attended 
the  College  of  Liberal  Arts  of  that  institution,  from  which 
he  graduated  with  the  A.  B.  degree  in  1908.  He  passed  the 
Government  competitive  examination,  was  granted  a  schol- 
arship and  came  to  the  United  States  in  1909.  He  studied 
at  Amherst  College  during  the  years  1 909-11,  graduating 
cum  laude  with  the  A.  B.  degree  in  19 10  and  receiving  the 
A.  M.  degree  in  191 1.  He  entered  the  School  of  Political 
Science  of  Columbia  University  in  the  fall  of  191 1.  At 
Columbia  he  studied  under  Professors  Seligman,  Seager, 
Clark,  John  B.  Moore,  Goodnow  and  Giddings,  and  at- 
tended the  seminars  of  Professors  Seligman  and  Seager. 

157 


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